Skip to main content

Full text of "The turning wheel; the story of General Motors through twenty-five years, 1908-1933"

See other formats





Don  M.  Larkin 


With  my  Compliments 

and  the  Autograph 

of  the  Author 




Atlantic  Monthly  Press,  1921 

Greenberg,  Inc.,  1926 

Macmillan  Co.,  1930 

Macmillan  Co.,  1 93 1 

Macmillan  Co.,  1931 


1930,  and 


1931.  The  Notes  of  Clarence  W .  Barron,  editor  of  THE  WALL 

STREET  JOURNAL.  Co-editor  with  Samuel  Taylor  Moore. 

Harper  &  Brothers. 


Argus,  Albany,  1932 


Sears,  1933 


commemorating  the  twenty-fifth  anniversary  of  General  Motors 






Drawings  by  WILLIAM  HEYER 



Garden  City,  New  York 

PRINTED  AT  THE  Country  Life  Press,  GARDEN  CITY,  N.  Y.,  u.  s.  A. 

COPYRIGHT,   1934 



Publisher's  Note 


T  is  probable  that  no  invention  of  such  far-reaching  im- 
portance was  ever  diffused  with  such  rapidity  or  so  quickly 
exerted  influences  that  ramified  through  the  national  culture, 
transforming  even  habits  of  thought  and  language."  This 
quotation  from  the  report  of  the  Hoover  Research  Com- 
mittee on  Social  Trends  refers  to  the  motor  vehicle. 

The  commonplaceness  of  motor  cars  in  our  daily  lives 
makes  us  unaware  of  their  significance.  It  is  almost  im- 
possible to  realize  a  present-day  world  without  automobiles, 
and  yet  motor  cars  are  little  more  than  a  generation  old. 

This  book,  then,  not  only  helps  to  make  us  conscious  of 
the  marvelously  rapid  development  of  a  new  art,  a  new 
convenience,  a  new  means  of  transportation,  but  also,  in 
giving  the  history  of  one  of  our  important  industries,  it 
provides  a  view  of  the  vast  social  consequences  of  inven- 
tion and  enterprise.  And  yet  General  Motors  is  but  twenty- 
five  years  old. 

Innumerable  histories  of  nations,  rulers,  wars,  and 
peoples  have  been  published  of  much  less  significance  than 
this  story  of  a  great  industry.  Our  leading  business  groups 
will  find  here  many  instances  and  examples  of  enterprising 
public  service.  Here  is  a  broad  yet  carefully  written  history 
of  an  industrial  enterprise  which  directly  or  indirectly 
affects  intimately  the  lives  of  our  people. 

vi  Publisher's  Note 

In  this  book  will  be  found  illuminating  accounts  of  in- 
ventors, financial  geniuses,  scientists,  business  statesmen. 
Their  accomplishments  have  altered  our  lives  and  will  affect 
those  of  our  grandchildren  and  great-grandchildren.  While 
making  motor  cars,  they  have  also  been  making  history. 



ENERAL  MOTORS  in  1933  reached  its  twenty-fifth  mile- 
stone. Since  the  founding  of  General  Motors  Company  of 
New  Jersey  in  1908,  the  growth  of  the  organization  has 
contributed  a  unique  chapter  to  American  industrial  his- 
tory. From  beginnings  so  small  that  its  birth  escaped  notice 
in  financial  centers,  General  Motors  has  worked  its  way 
steadily  forward  to  a  place  where  its  leadership  in  many  of 
the  most  exacting  branches  of  production  and  distribution 
is  taken  for  granted  and  where  it  meets  the  public  of  many 
lands  with  a  wide  variety  of  merchandise  and  services. 
Scientific  research,  close  attention  to  dealer  and  consumer 
needs,  and  constructive  public  policies  are  among  the  fac- 
tors accounting  for  General  Motors'  present  strength. 

The  older  companies  of  General  Motors,  now  known  as 
divisions,  go  back  to  the  early  days  of  the  automotive  indus- 
try, and  some  of  them  far  beyond.  Their  taproots  reach 
down  to  carriage-  and  wagon-building,  to  firearms,  station- 
ary and  marine  gasoline  engines,  milling  machinery,  roller 
bearings,  bicycle  gears,  lathes,  and  even  to  door-bells.  Their 
branch  roots  stretch  back  to  the  beginnings  of  scientific 
experiment,  since  the  self-propelled  vehicle  is  the  child  of 
physics  and  chemistry.  Chapters  n  and  in  trace  that  long 
evolution.  As  one  follows  the  rise  of  General  Motors 
against  the  broad  background  of  latter-day  industry  and 

viii  Foreword 

science,  he  comprehends  that  the  flowering  of  large-scale 
production  in  our  day  is  the  inevitable  result  of  generations 
of  inventiveness,  organizing  ability,  and  the  willingness  of 
capital  and  labor  to  pull  together  toward  common  objec- 
tives. Among  those  objectives  are  the  lifting  of  the  stand- 
ards of  living,  the  satisfaction  of  old  wants  with  less  labor, 
and  the  creation  of  new  wants  on  a  higher  level  of  comfort, 
convenience,  and  culture.  Modern  industry  has  conquered 
the  old-time  dearth  of  goods,  and  more  and  more  it 
searches  for  a  balance  wheel  through  whose  steadying  influ- 
ence its  products  can  remain  available  to  all  industrious  men 
and  women  at  all  times.  To  steady  economic  life  is  perhaps 
as  real  an  industrial  need  today  as  mass  production  was 
fifteen  years  ago,  as  real  a  need  as  the  automobile  was  forty 
years  ago,  when  men  traveled  at  the  pace  of  the  horse  over 
wretched  roads. 

My  acquaintance  with  General  Motors  began  at  its  birth 
in  1908,  and  as  a  somewhat  impartial  observer  of  social 
trends  I  have  watched  its  progress  with  keen  interest  ever 
since.  After  observing  General  Motors  employees  as  work- 
men and  citizens,  I  began,  more  than  thirteen  years  ago,  to 
write  in  Flint,  Michigan,  my  Iron  Man  papers,  noting  some 
of  the  social  effects  of  modern  industrialism.  The  Cor- 
poration seemed  then  to  foreshadow  many  of  the  develop- 
ments on  the  social  side  which  have  since  come  to  pass.  I 
welcomed  the  opportunity  to  complete  a  full-length  study 
with  access  to  records,  believing  that  the  story  of  a  great 
corporation's  growth  through  twenty-five  years  would  be 
of  more  than  passing  value,  since  corporations  are  the  most 
efficient  of  modern  groupings  and  probably  also  the  most 
meaningful  from  the  standpoint  of  basic  social  relations: 
work  and  wages,  production  and  distribution,  consumption 
and  investment.  If  it  appears  that  approval  is  voiced  here 
more  freely  than  the  reverse,  that  is  because  the  record  is 
clean  and  clear. 

As  I  review  the  history  of  General  Motors  in  my  mind, 
I  think  of  the  many  thousands  of  men  and  women  who 

Foreword  ix 

made  its  present  competence  come  to  pass  by  their  labors  in 
factories,  laboratories  and  offices,  and  in  the  field;  of 
workers  in  all  branches  of  production;  of  craftsmen  and 
designers  striving  to  combine  beauty  with  serviceability;  of 
scientists  patiently  attacking  problems  in  chemistry,  elec- 
tricity, metallurgy,  and  engineering;  of  foremen,  superin- 
tendents, and  inspectors;  of  dealers  and  salesmen  in  every 
land  searching  for  the  sales  by  which  the  Corporation  lives 
and  by  means  of  which  it  pays  wages  and  dividends.  This 
book  is  the  history  of  a  joint  effort  which  succeeded  be- 
cause, when  a  long,  strong  pull  was  needed,  team-play  tri- 
umphed over  the  frictions  which  tend  to  dissipate  human 
efforts  and  destroy  institutions. 

Those  who  recognize  in  General  Motors  a  force  of  the 
first  magnitude  in  America's  economic  life  will  find  here 
several  references  to  the  Corporation's  policies  which  have 
contributed  to  its  present  standing.  Some  of  these  policies 
apply  to  interdivisional  operations,  others  to  employees, 
dealers,  suppliers,  and  the  public.  Beyond  the  equities  in- 
volved in  strictly  commercial  contacts,  any  large  corpora- 
tion which  touches  the  lives  of  millions  of  persons  here  and 
abroad  can  scarcely  escape  being  rated  and  appraised  by 
public  opinion.  General  Motors  has  been  a  leader  in  pro- 
viding full  and  detailed  accounting  to  stockholders  and  in 
giving  the  general  public  accurate  news  of  what  it  is  doing 
and  why  it  is  doing  it. 

The  history  of  General  Motors  records  scientific  and 
commercial  achievements  of  a  high  order,  but  this  is  true 
of  many  corporations.  What  makes  this  corporation  most 
interesting  is  the  fact  that  its  expansion  was  rapid  and 
yet  it  was  marked  by  relatively  few  of  the  discords  usually 
connected  with  swift  industrial  growth. 

In  the  appendices  will  be  found  historical  notes  on  many 
subsidiaries  and  affiliates  not  treated  in  the  text. 

The  author  acknowledges  gratefully  the  assistance  of 
persons  too  numerous  to  mention  who  have  contributed  in- 
formation to  this  work,  including  many  formerly  active  in 

x  Foreword 

Corporation  affairs  but  now  retired,  and  others  whose  busi- 
ness relationship  with  General  Motors  in  its  early  days 
qualifies  them  to  testify  on  the  events  of  that  period. 

Special  thanks  are  due  to  Dr.  Dixon  Ryan  Fox,  Professor 
of  American  History  at  Columbia  University,  for  his  in- 
terest and  encouragement,  to  Dr.  John  S.  Worley,  Pro- 
fessor of  Transportation  at  the  University  of  Michigan, 
and  to  Dr.  M.  M.  Quaife,  secretary-editor,  the  Burton 
Historical  Collection,  Detroit  Public  Library,  for  their  aid 
in  research. 




Foreword  vii 


I     America  on  Wheels  I 

II     The  Evolution  of  Self-Propelled  Vehicles  6 

III  The  Formative  Period:  1879-99  27 

IV  Oldsmobile:  First  "Quantity"  Car  41 

V     Buick:  The  Foundation  Stone  of  General 

Motors  68 

VI     Oakland  and  Pontiac:  Old  and  New  91 

VII     Cadillac :  The  Triumph  of  Precision  100 

VIII     The  Birth  of  General  Motors  in 

IX     The  Bankers  Take  the  Wheel  131 

X     Chevrolet :  The  Cinderella  of  Motor-Car 

History  143 

XI     The  Corporation  Established  153 

XII     The  War  Years  167 

XIII     The  Expanding  Corporation  176 

XIV     The  New  Era  Under  President  du  Pont  193 

XV     Rounding  Out  General  Motors  209 

XVI     Later  Histories  of  Passenger  Car  Divi- 
sions 218 





















General  Motors  of  Canada,  Limited 
General  Motors  Across  the  Seas 
Research:  The  March  of  the  Open  Mind 

Body  by  Fisher:  The  Motor  Car  as  a 
Style  Vehicle 

Frigidaire  and  Electric  Refrigeration 

Commercial  Vehicles 

General  Motors  in  Aviation 

The  Point  of  View  of  General  Motors 

The  Stockholder  Interest 

Marketing  the  Motor  Car 

Financing  and  Insuring  the  Buyer 

Cooperative  Plans 

Public  Relations 


Roster  of  General   Motors  Officers   and 

General  Motors  at  the  Century  of  Prog- 
ress Exposition 

IV     Short  Histories  of  Subsidiary  and  Affili- 
ated Companies 

V     Some    Discontinued    and    Inactive    Com- 








Chronology  of  Self-Propelled  Vehicles          435 





Medal  by  Norman  Bel  Geddes  Frontispiece 


Ancient  Egyptian  Wheel  2 

Simon  Stevin's  sailing  chariot,  Holland  7 

Cugnot's  artillery  tractor,  1769  II 

"Orukter  Amphibolis" — Oliver  Evans'  Amphibian  12 

First  self-propelled  vehicle  to   attain  speed  of  ten 

miles  per  hour,  1810  14 

Sir  Goldsworthy  Gurney's  steam  carriage  16 

Richard  Dudgeon's  steam  carriage,  New  York,  1860  22 

First  motorcycle — oil  motor  29 

R.  E.  Olds's  first  horseless  carriage  33 

R.  E.  Olds's  first  factory,  Lansing,  Michigan  35 

Horseless  buggy  of  Charles  E.  Duryea,  1893  37 

"Horsey  Horseless  Carriage,"  Battle  Creek,  Michi- 
gan 39 

Glidden  Trophy  42 

R.  E.  Olds  45 

First  Oldsmobile,  1897  48 


xiv  Illustrations 


Authorization  for  construction  of  first  Oldsmobile  49 

First   American    automobile    factory,    Olds    Motor 

Works  52 

Detroit  to  New  York,  Roy  D.  Chapin  in  Oldsmobile  54 

Oldsmobile  curved-dash  runabout,  first  quantity  car  63 

Chauncey  M.  Depew,  at  wheel  of  Olds  runabout, 

1904  64 

First  Buick,  Detroit,  1902  70 

Original  Buick  factory  at  Flint,  Michigan,  1903-4  75 

First  Buick  car  built  at  Flint,  Michigan,  1903  77 

William  C.  Durant  83 

1904  Buick  88 

Henry  M.  Leland  101 

Cadillac  "one-lunger,"  1902  104 

Cadillac  cars  which  won  the  Dewar  Trophy,  1908  106 

Dewar  Trophy  108 

C.  S.  Mott  112 

James  J.  Storrow  127 

Thomas  Neal  133 

Charles  W.  Nash  138 

Walter  P.  Chrysler  140 

The  first  Chevrolet,  April,  1913  144 

Chevrolet  uRoyal  Mail"  roadster,  1914  146 

Model  490,  Chevrolet  149 

John  J.  Raskob  158 

Buick  war  tractor,  1918  169 

First  home  of  Dayton  Engineering  Laboratories  171 

General  Motors  Building,  Detroit  180 

Illustrations  xv 


Fred  J.  Fisher  182 

Pierre  S.  du  Pont  195 

Alfred  P.  Sloan,  Jr.  206 

Opel  Six  at  Shanghai,  China  208 

Bob  Burman  at  wheel  of  Buick  racer  220 

Cadillac:  first  car  with  electric  self-starter  223 

W.  S.  Knudsen  228 

Robert  McLaughlin  236 

R.  S.  McLaughlin  238 

Opel  car  in  African  exploration  251 

Charles  F.  Kettering  270 

Research  Building,  Detroit  277 

Charles  T.  Fisher  290 

Miniature  Napoleonic  coach  294 

Map  of  General  Motors  Proving  Ground  302-303 

Early  motor  fire  engine  311 

Pioneer  police  patrol  wagon,  Chicago  314 

GA-43,  all  metal  monoplane  320 

GA-43  :  front  view  323 

GA-43:  side  view  325 

Flying  Lifeboat:  GA-FLB  327 

Weather  Bureau  Station,  General  Motors  Proving 

Ground  346 

Entrance  to  General  Motors  Proving  Ground  346 

New  York  headquarters  of  General  Motors  351 

Lammot  du  Pont  353 

Buick  on  steps  of  Summit  House,  Pike's  Peak  358 

Night  Scene:  Century  of  Progress  Exposition  366 

xvi  Illustrations 


Chevrolet  Assembly  Line  370 

Dr.  Carlos  C.  Booth  378 

Harry  H.  Bassett  410 

General  Motors  Institute,  Flint,  Michigan  412 

Albert  Champion  457 

Herbert  C.  Harrison  468 

John  Wesley  Hyatt  469 

Alexander  Winton  481 


Chapter   I 


N  A  single  picture  are  caught  and  recorded  centuries  of 
history.  In  the  distance,  ready  to  vanish  over  the  hill,  is  an 
Indian  family  departing  with  its  poor  goods  and  beaten 
gods.  A  tiny  pony  strains  between  two  poles,  across  which 
is  a  laden  platform.  The  poles  drag  on  the  earth.  In  the 
foreground  is  the  settler's  covered  wagon,  drawn  by  strong 
horses  and  ready  to  roll  westward  as  long  as  its  tall,  iron- 
shod  wheels  hang  together. 

The  wagon  holds  more  wheels  and  the  produce  of  wheels : 
a  spinning  wheel  and  the  cloths  which  wheels  have  fabri- 
cated; a  plowshare  which  some  wheel  has  helped  to  smooth 
and  point.  There  is  a  rifle  fashioned  on  a  lathe  to  which 
the  principle  of  the  wheel  has  been  adapted.  A  continent 
is  being  surrendered  to  those  who  come  on  wheels.  The 
conqueror  sets  his  wheels  in  motion  and  moves  on  with  calm 
assurance  to  occupy  the  empire  which  wheels  have  enabled 
him  and  his  kind  to  possess.1 

It  is  one  of  the  paradoxes  of  history  that  America,  where 
modern  civilization  runs  on  wheels,  was  a  wheel-less  country 
before  the  white  man  came  to  its  shores.  Other  peoples, 

Bernard  de  Voto,  Mark  Twain's  America,  p.  24.:  "That  winter  he 
[Marcus  Whitman,  the  missionary]  gathered  a  large  mission.  Also  he  found 
a  wife;  and  she  and  another  woman  joined  the  caravan  that  took  the  trail 
the  following  spring  [1836].  The  caravan  possessed,  too,  wagons  and  a  light 
cart  that  were  to  go  further  into  transalpine  America  than  wheels  had  ever 
gone  before.  The  western  filtrate  had  now  no  boundary  to  its  passage  but 
the  Pacific  sea." 

2  The  Turning  Wheel 

no  more  primitive  than  the  American  Indian,  had  discov- 
ered and  applied  the  wheel  in  the  dawn  of  civilization;  in- 
deed, it  is  likely  that  without  the  wheel  Western  civilization 
would  never  have  emerged  from  its  birth  throes.  The  two- 
wheeled  chariots  of  Nineveh  broke  down  the  barriers  of 
space  and  the  boundaries  of  empires  built  on  self-contained 
river  valleys.  The  mergings  of  peoples,  exchange  of  ideas, 
tools,  and  goods  over  wide  distances — in  short,  the  early 
education  of  the  race  in  commerce,  mechanics,  language,  and 
thought — were  destined  henceforth  to  proceed  through  and 
by,  and  to  a  large  extent  directly  on,  wheels. 

Yet  prehistoric  America  somehow  missed  this  potent  ap- 
plication of  the  wheel  to  earth.  Their  grave  lack  was  early 
noted  by  scholars.  The  learned  Dr.  Robert  Hooke,  in  the 
1726  edition  of  his  Philosophic  Experiments  and  Observa- 
tions, says  that  ignorance  of  the  wheel  in  aboriginal  Amer- 
ica indicates  that  its  inhabitants  could  not  have  come  hither 
from  Europe,  Africa,  or  Asia,  since  the  wheel  "is  an  in- 
vention of  so  great  use,  that  it  seems  impossible  to  be  lost 
by  mankind,  after  it  be  once  known." 

Ancient  Egyptian  Wheel 

The  American  Indians  possessed  marked  capacities  in 
many  directions.  They  were  excellent  workers  in  stone,  as 
well  as  hardy  hunters  and  bold  warriors.  They  traversed 
wide  areas  in  both  war  and  chase;  they  were  essentially 
moral  and  lived  a  primitive  religion  of  exalted  concepts 
and  close  harmonies.  In  their  intertribal  relations  they  were 
capable  of  acute  political  sagacity;  The  Great  Peace  Pact 

America  on  Wheels  3 

of  the  Five  Nations  of  the  Iroquois  Confederacy,  which 
endured  at  least  three  centuries,  is  one  of  the  most  subtle 
adjustments  of  conflicting  national  political  interests  ever 
devised,  more  intricate  and  better  balanced  than  the  League 
of  Nations.  Yet  the  Indian  gave  way  before  the  whites  be- 
cause the  newcomers  had  better  tools,  especially  better 
weapons  and  vehicles. 

At  one  time  or  another  the  American  aborigines  had  used 
the  other  five  primary  machines:  the  lever,  wedge,  screw, 
pulley,  and  the  inclined  plane.  With  these  the  Mayas  of 
Yucatan  and  Guatemala  and  the  Incas  of  Peru  built  mas- 
sive edifices.  But  there  is  no  evidence  that  the  Red  Man 
ever  had  command  of  the  wheel.  In  the  meantime,  through 
the  centuries  of  recorded  time  and  before,  the  Asiatics, 
Europeans,  and  Egyptians  had  not  only  evolved  wheeled 
carts  and  chariots,  but  also  they  had  made  so  many  efficient 
combinations  of  the  wheel  with  the  other  five  primary  ma- 
chines that  they  had  evolved  the  compass  to  guide  them  to 
America,  domestic  tools  of  many  sorts,  the  well-ground 
sword  blade,  and  the  musket  which  spat  fire.  The  conquerors 
had  inherited  a  superior  technology  as  well  as  superior  form 
of  carriage  on  land  and  sea.  Hence  the  aborigines  gave 
way.  One  reason — and  perhaps  the  root  reason — for  the 
failure  of  the  aboriginal  inhabitants  effectively  to  occupy 
and  defend  North  America  may  well  have  been  their  failure 
to  master  the  wheel. 

But  merely  to  put  two  wheels  on  the  ground,  with  an 
axle-tree  between  them,  is  not  enough  to  satisfy  an  artful 
folk  with  pressing  problems  to  solve — problems  of  suste- 
nance and  distribution,  problems  of  state  and  war.  The 
fabled  wheel  of  Ceres,  the  goddess  of  Agriculture,  might 
be  turned  into  a  country  cart,  the  scythed  chariot  might  do 
for  war,  but  not  for  long  could  either  satisfy  the  eternal 
demand  of  a  questing  people  for  more  speed,  more  thrills, 
more  wealth.  The  ancients  applied  more  power  to  wheels 
by  harnessing  eight  and  twelve  horses  to  their  chariots  and 
as  many  oxen  to  their  wagons,  increasing  their  teams  of 
draft  animals  up  to  the  full  limit  of  the  wit  and  muscle  of 
men  in  controlling  them.  Within  the  limits  prescribed  by 
flesh  and  blood  these  ambitious  men  of  ancient  days  did 

4  The  Turning  Wheel 

what  they  could  to  increase  their  power  in  transport.  They 
built  gorgeous  equipages  of  state,  rode  furiously  in  their 
hunts,  developed  strains  of  horseflesh  suitable  to  various 
purposes — chargers  for  war,  draft  horses  for  tillage,  light 
palfreys  for  milady  to  ride,  high-stepping  carriage  horses. 
They  developed  wheeled  vehicles  in  great  variety,  from  the 
simple  cart  to  impressive  and  beautiful  coaches  of  royalty. 
But  ever  and  always  each  generation  was  restricted  in  its 
burning  desire  to  conquer  space  and  time  by  the  fact  that 
the  horse  represented  at  once  the  strongest  and  most  flexible 
power  plant  he  could  apply  to  the  wheels  of  his  vehicles. 
Other  animals  might  outdraw  the  horse,  but  no  other  animal 
could  combine  pulling  power  with  as  prompt  acceleration. 
The  unique  conformation  of  the  horse's  leg  from  hoof  to 
hip-joint  gives  him  a  leverage  out  of  all  proportion  to  his 
weight,  and  for  centuries  he  was  the  best  motive  force  man 
had  at  his  disposal  for  transportation  purposes. 

The  Horse  Age  lasted  from  the  dawn  of  history  to  recent 
times.  In  those  slow-moving  centuries  enormous  advances 
were  made  in  other  directions,  but  land  transport  remained 
keyed  to  draft  animals.  Man  charted  the  solar  system,  dis- 
covered the  mass  of  the  earth  by  laying  out  a  geographical 
degree  on  the  plains  of  Greece,  applied  the  arch,  tenon, 
and  pillar  in  architecture,  constructed  huge  cathedrals  of 
surpassing  beauty,  worked  out  the  basic  laws  of  physics 
and  mathematics,  began  experiments  in  chemistry,  developed 
marine  transportation  from  the  oar  to  the  sail,  applied  the 
compass  to  the  discovery  of  America  and  the  circumnaviga- 
tion of  the  earth,  built  large  and  cunningly  contrived  vessels 
for  the  mastery  of  wind  and  water,  and  harnessed  water 
power  to  turn  looms.  Laboriously  he  brought  water  trans- 
port by  means  of  canals  to  assist  in  his  problems  of  land 
carriage.  In  all  the  practical  arts  the  advance  of  knowl- 
edge had  been  tremendous,  but  from  the  dawn  of  history 
down  to  modern  times  mankind  had  available  in  quantity 
for  land  transport  no  better  motive  power  than  the  horse. 

Yet  the  challenge  toward  improvement  persisted.  Dimly 
the  more  progressive  peoples  have  understood  the  truth 
laid  down  in  the  report  of  a  Select  Committee  of  the 
British  House  of  Commons  on  Highways  in  1808,  that 

America  on  Wheels  5 

"next  to  the  general  influence  of  the  seasons  upon  which 
the  regular  supply  of  our  wants  and  a  great  proportion  of 
our  comfort  so  much  depend,  there  is  perhaps  no  circum- 
stance more  interesting  to  men  in  a  civilized  state  than  the 
perfection  of  the  means  of  interior  communication." 

A  philosophical  investigator  of  transportation  has  said, 
"with  the  exception  of  land  and  ruins  there  are  few  things 
of  any  material  value  to  man  which  do  not  derive  that 
value,  in  part  at  least,  from  transport  from  their  original 
position."  One  might  go  further  and  say  that  life,  shorn  of 
the  prospect  of  ever  improving  transportation,  would  be 
dull,  flat,  and  unprofitable.  Truly  civilization  has  run  on 
wheels  from  the  stone  discs  of  the  primitive  cart  to  the 
rubber  tires  of  the  automobile. 

Chapter   II 




.HE  evolution  of  transport  has  been  worked  out  by  John 
Brisben  Walker  and  others  somewhat  as  follows : 

Floating  log 

Animal's  back 

Sledge  down  hill 

Horse-drawn  sledge  cart 


Ox  cart 


Oared  galley 

Sedan  chair 

Sailing  vessel 


Man-powered  carriage 

Sailing  chariot 

Coach  and  carriage 


Free  balloon 

Steam  carriage 




Cable  car 

Electric  trolley  car 


Airplane  and  airship 

Observe,  in  the  sequence,  the  progress  from  the  simplest 
of  motive  powers,  water  running  under  the  pull  of  gravity, 
to  the  explosions  of  rarefied  gases  in  the  internal  combus- 
tion engine.  Those  in  the  first  half  of  the  list  are  shrewd 
adaptations  of  forces  found  in  nature.  Of  special  interest  is 
the  sailing  chariot,  known  in  China,  and  brought  to  its 
peak  in  Holland,  where  one  designed  by  Simon  Stevin, 
about  1600,  covered  forty-two  miles  in  two  hours,  carrying 
twenty-eight  persons,  and  was  used  quite  regularly. 


Evolution  of  Self-propelled  Vehicles      7 

Even  before  man  tried  to  harness  the  wind  to  land  trans- 
port, he  endeavored  to  "beat  the  horse"  by  various  com- 
binations of  muscle  and  machinery.  Heliodorus  notes  a 
triumphal  chariot  at  Athens  moved  by  slaves  who  worked 
machinery.  A  Jesuit  missionary  in  China,  Matthieu  Ricci 
(1552-1610),  declared  that  he  had  traveled  there  inside  a" 

Simon  Stevin's  sailing  chariot,  Holland,  about  A.  D.  1600 

great  wheel,  propelled  by  two  fellow  passengers  who  used 
levers  to  give  the  wheel  forward  motion.  A  beautiful  series 
of  drawings  comes  down  from  the  Middle  Ages,  showing 
men  propelling  heavy  and  ornate  carriages  by  worm  and 
other  gears.  The  last  supreme  effort  in  that  direction  seems 
to  be  Sir  John  Anderson's  1831  patent,  in  which  twenty-four 
oarsmen  provided  the  energy. 

We  are  accustomed  to  think  of  the  steam  engine  as  a 
world-shaking  invention,  but  the  fact  is  that  for  centuries 
after  its  first  application  the  world  wagged  on  without  giv- 
ing the  steam  engine  a  second  thought.  Hero  of  Alex- 
andria, living  in  the  second  century  before  Christ  (130 
B.C.),  described  in  his  Pneumatica  his  famous  self-propelled 

8  The  Turning  Wheel 

apparatus  known  as  the  Aeolipile,  and  also  a  fountain,  both 
operated  by  steam.  The  principle  used  in  the  engine  which 
worked  the  fountain  became  highly  important  centuries 
later,  but  the  scientific  Hero  appears  to  have  had  no  dis- 
coverable successor  until  the  forgetful  Middle  Ages  had 
come  and  gone,  although  engines  like  his  probably  were 
used  in  unimportant  ways  and  more  to  amuse  than  to  per- 
form useful  work.  After  the  lapse  of  1300  years,  that 
bold  monk,  Roger  Bacon  (1214-94)  uttered  a  prophecy 
to  which  no  one  listened:  "It  will  be  possible  to  construct 
chariots  so  that  without  animals  they  may  be  moved  with 
incalculable  speed."  The  prophecy  is  less  remarkable  than 
the  revelation  it  gives  of  the  complete  loss  of  interest  in 
science  between  Hero's  time  and  that  of  Roger  Bacon;  so 
the  latter  could  do  no  more  than  prophesy  in  a  field  where 
the  former  actually  had  experimented. 

With  the  Renaissance,  interest  revived  in  science  as  well 
as  in  art  and  letters.  Giovanni  Baptista  della  Porta  in  1601 
began  where  Hero  had  left  off  sixteen  centuries  earlier,  thus 
anticipating  SaveryTs  first  practical  and  productive  steam 
engine  by  nearly  a  century. 

Ramsay  and  Wildgoose  were  not  thinking  of  steam  when 
they  applied  for  an  English  patent,  in  1619,  for  "drawing- 
carts  without  horses."  However,  the  edge  of  the  curtain 
was  being  drawn  aside  a  little  about  this  time  for  the  intro- 
duction of  the  modern  Steam  Age.  In  1629  Giovanni 
Branca,  an  Italian,  came  forward  with  a  steam  turbine,  now 
rated  superior  to  Hero's  steam  engine  and  also  to  that  of 
the  same  type  generally  accredited  to  the  great  English 
physicist,  Sir  Isaac  Newton  (1642-1727),  which  was  along 
the  same  line.  It  is  likely  that  the  Newton  engine  was  made 
after  Newton's  suggestions  rather  than  by  Newton  him- 
self. Both  Branca  and  Newton  suggested  certain  uses  for 
their  simple  engines,  among  them  the  propulsion  of  a 
vehicle  by  a  jet  of  steam,  a  means  still  used  in  cheap  toys. 
A  Jesuit  missionary  in  Pekin,  China — Father  Verbiest, 
about  1630 — used  an  aeolipile,  says  Lavergne,  "with  jets 
of  steam  playing  on  a  revolving  winged  wheel  geared  to  the 
wheels  of  a  car."  In  1633,  Edward  Somerset,  Marquis  of 

Evolution  of  Self-propelled  Vehicles      9 

Worcester,  fathered  a  double-action  steam  engine,  with  dis- 
placement chambers,  which  was  the  first  useful  engine, 
though  not  commercially  successful. 

While  Englishmen  and  Italians  were  pioneering  in  steam, 
a  Dutch  scientist,  Christian  Huyghens,  in  1680  described  the 
first  step  in  the  evolution  of  the  modern  internal  combus- 
tion engine,  the  invention  of  a  first  explosion  engine.  In  this 
ancestor  of  all  internal  combustion  engines  the  ignition  of 
gunpowder  in  a  cylinder  produced  a  vacuum  into  which  out- 
side atmospheric  pressure  pushed  the  piston.  Ten  years 
later,  in  1690,  Denis  Papin,  a  young  French  doctor  ac- 
quainted with  Huyghens,  substituted  steam  for  gunpowder, 
thereby  earning  himself  a  place  in  history  as  the  inventor  of 
the  earliest  piston-and-cylinder  steam  engine,  although  his 
efforts  fell  short  of  practical  success. 

In  1698  Thomas  Savery  (1650-1715)  obtained  a  patent 
for  a  steam  engine  designed  to  raise  water,  and  applied  to 
it  a  safety  valve  by  J.  T.  Desaguliers,  thus  realizing  on  the 
suggestion  of  della  Porta,  put  forth  nearly  a  century 
earlier.  Raising  water  from  coal  mines  seems  to  have  been 
more  of  a  problem  at  this  time  than  swift  transportation, 
and  for  nearly  a  hundred  years  that  field  was  cultivated  by 
inventors  to  the  practical  exclusion  of  others.  Thomas  New- 
comen,  an  associate  of  Savery,  produced  various  atmos- 
pheric steam  engines,  from  1705  to  1711,  which  found  im- 
mediate and  high  favor  with  the  mine  operators.  Other 
engineers  contributed  to  this  development,  yet  none  of  them 
seems  to  have  followed  seriously  Papin's  lead  toward  loco- 
motion. But  witty  Bishop  Berkeley  could  see  further  than 
the  men  who  knew  tools;  in  1740  he  said:  "Mark  me,  ere 
long  we  shall  see  a  pan  of  coals  brought  to  use  in  place  of 
a  feed  of  oats." 

Soon  men  again  began  to  think  about  power  transport. 
Spring-driven  carriages  were  made  in  Germany  in  the 
Middle  Ages.  The  spring  method  of  propulsion  lingered  for 
a  long  time  and  developed  some  fairly  successful  vehicles, 
but  of  course  they  did  not  solve  at  all  the  problems  of  speed 
and  power.  A  step  in  the  latter  direction  came  a  little  later, 
in  1753,  when  Daniel  Bournoulli  demonstrated  to  the 
French  Academy  the  point  at  which  steam  power  could  be 

10  The  Turning  Wheel 

applied  to  navigation,  and  was  given  a  prize  by  that  body 
which  even  then  exercised  an  inspiring  influence  on  the  new 
science.  The  stationary  steam  engine  had  proved  its  useful- 
ness, and  was  at  work  daily  in  hundreds  of  places.  The 
question  was:  how  to  make  the  steam  engine  portable,  gear 
it  to  wheels,  and  get  it  on  the  road? 

This  question  tormented  the  learned  Dr.  Erasmus  Dar- 
win (1731-1 802 ) ,  who  urged  Boulton  and  Watt,  the  steam- 
engine  manufacturers,  to  produce  a  "fiery  chariot"  which 
would  fulfill  the  startling  prophecy  contained  in  Darwin's 
poem,  The  Botanic  Garden: 

Soon  shall  thy  arm,  unconquered  steam,  afar 
Drag  the  slow  barge,  or  drive  the  rapid  car; 
Or  on  the  waving  wings,  expanded  bear 
The  flying  chariot  through  the  field  of  air; 
Fair  crews  triumphant,  leaning  from  above, 
Shall  wave  their  fluttering  kerchiefs  as  they  move, 
Or  warrior  bands  alarm  the  gaping  crowds, 
And  armies  shrink  beneath  the  shadowy  clouds. 

James  Watt  was  a  canny  Scot  who  is  generally  regarded 
as  the  inventor  of  the  steam  engine,  though  we  have  seen 
that  he  had  several  predecessors.  He  made,  however,  a 
good  many  telling  improvements  on  Newcomen's  engines 
from  1769  on,  bringing  the  steam  engine  to  the  point  where 
others  more  daring  than  himself  were  willing  to  place  it  in 
carriages  and  vessels. 

So  the  scene  shifts  to  France  for  the  great  experiment 
in  which  a  full-sized  steam  carriage,  designed  for  a  special 
task,  took  the  road.  It  will  hardly  do  to  say  flatly  that  this 
was  the  first  self-propelled  vehicle,  but  it  was  certainly  the 
first  definitely  constructed  for  a  concrete  and  practical  pur- 
pose in  contrast  to  those  strictly  experimental  and  of  small 
scale.  Under  the  stern  call  of  war  Captain  Nicholas  Joseph 
Cugnot  designed  and  directed  the  construction  of  an 
artillery  gun  tractor  which,  had  it  been  successful,  would 
have  given  Royalist  France  undisputed  control  of  Europe. 
Seldom  have  the  destinies  of  the  world  waited  so  directly 
upon  the  success  or  failure  of  a  machine. 

Evolution  of  Self-propelled  Vehicles     11 

It  was  a  three-wheeler,  with  the  single  front  wheel  carry- 
ing a  tremendous  load  in  the  boiler  and  engine,  all  of  which 
had  to  be  moved  on  a  pivot  in  order  to  change  direction. 
But  it  also  had  the  failing,  repeated  over  and  over  during 
the  next  century,  of  being  underpowered  for  the  work  to  be 
done.  It  traveled  at  about  three  miles  an  hour,  had  to  be 
refueled  at  fifteen  miles,  and  on  the  second  test,  upset.  The 

Cugnot's  artillery  tractor,  1769, 
first  self-propelled  vehicle  built  for  road  work 

fickle  Ministry,  which  had  financed  construction  at  great 
expense,  turned  upon  the  inventor,  and  he  went  into  exile. 
When  Napoleon  came  to  power  twenty  years  later,  he  re- 
called Cugnot,  put  him  on  a  pension,  and  sought  to  revive 
the  project,  but  by  failing  to  follow  up  this  idea  of  artillery 
transport,  he  lost  a  telling  chance  to  increase  the  mobility 
of  his  artillery,  just  as  his  failure  to  adopt  Fulton's  sub- 
marine lost  him  his  chance  to  invade  England. 

12  The  Turning  Wheel 

Three  years  after  Cugnot's  daring  effort,  Oliver  Evans 
(1755-1819)  of  Delaware  dreamed,  in  1772,  of  using  steam 
to  propel  carriages,  but,  by  his  own  statement,  did  not  work 
out  the  plans  for  his  engine  till  I784.1  He  was  certainly  the 
first  American  to  apply  steam  to  a  road  vehicle.  It  was  he 
who  received  the  first  United  States  patent  covering  a 
"self-propelled  carriage,"  dated  October  17,  I789.2 

'Orukter  Amphibolis" — Oliver  Evans'  amphibian, 
driven  in  Philadelphia,  1804 

This  extraordinary  man,  whose  genius  was  better  recog- 
nized abroad  in  his  day,  and  still  is,  than  at  home,  antici- 
pated Trevithick  in  applying  the  high-pressure  principle  to 
steam  engines.  He  sent  to  England  the  drawings  of  his 
1787  engine;  these  are  said  to  have  been  seen  by  Trevithick 
in  1794-95  and  applied  by  him.  In  1804  Evans  astonished 
the  mechanical  world  by  moving  in  Philadelphia,  partly 
by  water  and  partly  by  land,  a  combination  steam-wagon 
and  flatboat,  the  first  authentic  amphibian  of  record.  A  pic- 
ture of  Evans  guiding  his  2i-ton  Orukter  Amphibolis  hangs 
in  the  Automobile  Wing  of  the  Arts  and  Manufactures 
Section  of  the  Smithsonian  Institution  at  Washington,  D.  C., 
facing  the  display  of  ancient  motor  vehicles  which  are  in 
direct  line  of  descent  from  Evans*  first  American  self- 
propelled  vehicle.  He  is  the  great  American  name  in  the 
early  stages  of  motor  vehicle  development. 

Another  candidate  for  inventor  of  the  first  American 
steam  carriage  is  Dr.  Apollos  Kinsley  of  Hartford,  who  is 

*The   Young   Steam   Engineer's   Guide,   by   Oliver   Evans.    First   edition, 
Philadelphia,  1805. 
Encyclopaedia  Britannica,  nth  ed.  vol.  10,  p.  2. 

Evolution  of  Self-propelled  Vehicles     13 

described  in  Forest  Morgan's  Connecticut  as  a  Colony  and 
a  State  as  "driving  the  highways  of  Hartford  in  one  of  the 
first  steam  carriages  ever  conceived,  of  which  he  was  the 
inventor  at  the  close  of  the  i8th  century." 

Many  an  idea  which  events  have  shown  to  be  sound  was 
unduly  delayed  by  the  inability  of  inventors  to  find  back- 
ing. A  strange  example  of  this  misfortune  is  William  Mur- 
dock  (1754-1839),  a  subordinate  of  Boulton  and  Watt, 
who  made  a  model  of  a  steam  carriage  which  was  far 
ahead  of  its  time  in  the  simplicity  of  the  application  of 
power,  but  he  never  patented  it  because  his  employers  dis- 
couraged him. 

There  is  something  dynamic  and  challenging  in  the  turn 
of  a  century  which  stirs  the  soul  of  man  to  fresh  creative 
effort.  It  was  so  in  1800.  Inventions  flooded  into  the  British 
patent  office.  Then  Richard  Trevithick  (1771-1833),  the 
"Captain  Dick"  who  was  destined  to  taste  the  triumph  of 
placing  the  first  locomotive  on  wheels,  to  make  and  lose 
fortunes,  and  to  die  at  last  in  poverty,  stepped  into  the  field 
of  the  steam  carriage.  Wherever  Dick  Trevithick  took  his 
stand  in  his  prime  he  made  history.  He  brought  forward  in 
1 80 1  a  steam  carriage  whose  boiler  was  of  American 
descent,  since  Trevithick  was  directly  influenced  by  the 
Americans,  Oliver  Evans  and  Nathan  Read.  It  produced 
sixty  pounds  pressure.  Trevithick  used  a  long-stroke  engine 
coupled  directly  to  the  driving  wheels.  He  had  been  at  work 
on  this  design  five  years.  It  was  put  together  in  a  black- 
smith shop.  One  of  his  friends  left  this  lively  picture  of  its 
initial  trial : 

In  the  year,  1801,  upon  Christmas  eve,  Captain  Dick  got  up  steam, 
out  in  the  highroad,  just  outside  the  shop.  When  we  see'd  that 
Captain  Dick  was  a-goin'  to  turn  on  steam,  we  jumped  as  many  as 
could,  maybe  seven  or  eight  of  us.  'Twas  a  stifEsh  hill  but  she  was 
off  like  a  little  bird.  .  .  .  They  turned  her  and  came  back  to  the 

Merry  Christmas  for  Captain  Dick — that  of  1801!  He 
ran  this  car  in  and  out  of  London  several  times  at  an  aver- 
age speed  of  five  miles  an  hour.  But  there  was  then  no 
market  for  such  an  innovation,  and  Dick  and  his  partner 


The  Turning  Wheel 

Vivian  approached  the  end  of  their  slim  resources.  In  May, 
1803,  Trevithick  thought  he  could  sell  one  quarter  interest 
in  his  patent  for  £10,000,  but  the  deal  fell  through.  His  car- 
riage tore  down  a  fence  and  was  denied  the  road  by  pur- 
blind authority.  The  carriage  was  dismantled;  the  engine 
sold  to  operate  a  mill.  Alas  for  dreams !  But  within  another 
year  Captain  Dick  was  ready  to  place  upon  the  rails  the  first 
steam  locomotive,  and  by  so  doing  earn  beyond  cavil  a 
secure  fame. 

England  in  the  first  decade  of  the  nineteenth  century  was 
still  a  rural  and  rustic  land,  full  of  conservatives,  rich  and 
poor.  The  roads  were  not  generally  good,  but  the  main 
roads  were  kept  passable  by  toll-roads  associations  in  which 
considerable  capital  was  invested.  The  coaching  interests 
and  the  toll-road  interests  coincided  on  one  point  at  least, 
that  newfangled  vehicles  should  be  discouraged. 

First  self-propelled  vehicle  to  attain  speed  of  ten  miles  per  hour,  1810 

These  interests  were  sure  to  rise  against  a  new  form  of 
highway  transport  which  drew  nearer  practicability  year  by 
year.  In  1811  Blenkinsop  of  Leeds  made  a  practical  appli- 
cation of  steam  power  in  transport  by  drawing  thirty  coal 
cars  from  Middletown  to  Leeds,  three  and  a  half  miles,  in 
one  hour.  Interest  rose  until  hardly  a  technical  magazine 
appeared  without  mention  of  some  new  vehicle  or  experi- 
ment. The  Monthly  Magazine  (London)  for  November  i, 
1819,  contains  five  items  on  self-propelled  vehicles,  mostly 

Evolution  of  Self-propelled  Vehicles     15 

hand-  or  foot-propelled  in  ingenious  ways,  and  all  prob- 
ably bone-shakers.  But  the  extent  of  the  interest  in  self- 
propelled  vehicles  in  London  can  be  seen  in  this  sentence: 
"A  steam  carriage  has  been  invented  in  Kentucky,  of  which 
word  is  eagerly  awaited." 

In  1821  Julius  Griffiths  led  off,  with  a  well  made  steam 
carriage,  a  line  of  these  vehicles  destined  to  become  so 
numerous  in  the  next  few  years  that  the  highway  problem 
they  created  caused  a  Parliamentary  investigation. 

In  the  primitive  state  of  the  art,  inventors  had  not  yet 
learned  even  the  primary  truth  that  driving  wheels  would 
give  them  enough  traction,  and  that  passengers  could  be 
safely  carried  on  the  same  chassis  as  the  engine.  Like  the 
locomotive,  which  from  the  first  was  a  "drag"  pulling  other 
vehicles,  many  of  the  early  steam  carriages  made  no  pro- 
vision for  passengers,  and  these  were  accommodated  in 
stagecoaches  attached  as  trailers.  Of  the  latter  type 
was  the  Patent  Steam  Carriage  of  1824,  designed  by 
W.  H.  James  and  produced  by  him  with  the  aid  of  Sir 
James  Anderson,  Bart.  It  contained  several  features  of 
novelty  and  long-continuing  interest.  James  used  four 
cylinders  coupled  to  two  crankshafts.  Each  pair  of  cylinders 
and  each  driving  wheel  was  independent  of  the  other,  to 
avoid  a  compensating  gear  in  turning  corners.  In  a  second 
vehicle,  1829,  James  forsook  his  original  principles  of 
design,  "mistaking  failure  in  detail  for  failure  in  principle," 
and  produced  a  steam  tractor  more  in  accord  with  common 

While  England  was  entering  into  a  fury  of  experimenta- 
tion, there  appeared  in  France,  in  1828,  a  steam  carriage 
by  Pecqueur  of  Paris  which  Lavergne  says  contained  the 
germ  of  all  the  vital  mechanisms  of  the  modern  automobile, 
chief  among  these  being  a  driving  wheel  geared  to  the  rear 
axle,  planet  gearing,  spring  suspension,  and  a  competent 
steering  arrangement.  What  English  invention  lacked  in 
these  respects  it  made  up  for  in  aroused  feeling  among 
inventors,  whose  search  for  capital  and  public  acclaim 
lashed  them  into  furies  of  controversy  against  each  other. 
It  is  impossible,  at  this  distance  in  time,  to  sift  the  wheat 
from  the  chaff  in  the  printed  evidence  of  these  broils. 

16  The  Turning  Wheel 

Sir  Goldsworthy  Gurney  occupies  the  chief  place  in  this 
literature  of  controversy.  As  a  boy  he  had  seen  Trevithick's 
steam  carriage  and  followed  that  lead  by  diligently  pro- 
ducing a  succession  of  coaches  known  as  Gurney's  steam 
carriages.  He  is  said  to  have  made,  in  1829,  the  first  long 
sustained  journey  by  mechanical  means,  from  London  to 
Bath  and  return,  a  distance  of  200  miles,  at  a  speed  of  15 

Sir  Goldsworthy  Gurney's  steam  carriage,  London  to  Bath,  1829 

miles  per  hour.  This  record  is  challenged  by  a  rival,  how- 
ever: the  picturesque  soldier  of  fortune,  Colonel  Francis 
Maceroni.  The  Colonel,  with  a  rival  machine  in  hand,  had 
fish  of  his  own  to  fry. 

This  and  many  other  jealousies  were  brought  into  the 
open  at  and  immediately  following  the  hearings  of  the 
Select  Committee  of  the  House  of  Commons  in  1831,  one 
of  the  important  milestones  in  the  history  of  self-propelled 
vehicles,  because  England  then  led  the  world  as  an  indus- 
trial nation,  and  the  state  of  the  art  was  presented  to  the 
Committee  by  the  leading  inventors  and  engineers.  This 
Parliamentary  inquiry  seems  to  have  been  an  honest  attempt 
to  discover  how  far  the  highways  were  likely  to  be  injured 
by  steam  vehicles,  and  what  promise  mechanical  transport 
held  out  to  the  nation.  We  will  understand  its  importance 
if  we  recall  that  the  new  departure  in  transportation  was 
under  fire  from  several  substantial  interests:  the  alliance 
between  turnpike  associations  and  stagecoach  operators, 
the  widespread  antipathy  of  a  public  always  conservative 

Evolution  of  Self-propelled  Vehicles    17 

and  in  those  years  of  Chartist  discontent  bitterly  opposed 
to  the  introduction  of  machinery  in  all  lines  of  work,  and 
the  newly  arisen  railroad  interest.  The  first  railroad  for 
regular  passenger  and  freight  traffic,  the  Stockport  and 
Darlington,  had  begun  operations  six  years  earlier.  Other 
railroads  had  been  opened;  some  of  them  were  actually 
earning  money,  and  one  of  them  was  in  a  position  to  pay  a 
first  dividend.  With  this  record  of  earnings,  capital  gen- 
erally was  for  "clearing  the  track"  of  competition. 

Almost  from  the  moment  when  Trevithick  put  his  first 
steam  engine  on  the  rails,  British  railroading  had  marched 
ahead,  until,  after  only  twenty  years  of  trial,  railroading 
had  begun  to  pay.  Against  this  notable  progress,  steam 
travel  on  the  highways  could  produce  nothing  comparable. 
Steam  on  the  highways  had  never  earned  a  shilling,  had 
killed  some  persons,  and  thrown  whole  countrysides  into 
terror,  and  both  the  influential  and  the  ignorant  set  their 
weight  to  hold  the  highways  for  horses  and  pedestrians.  Sir 
Goldsworthy  Gurney,  for  instance,  was  mobbed  and  his 
engineer  injured  at  a  country  fair. 

In  the  ten  years  from  1828  to  1838  Walter  Hancock 
built  nine  large  steam  carriages,  of  which  six  were  used  in 
carrying  passengers.  His  buses  were  safe,  dependable,  and 
handsome.  The  public  liked  them,  and  Hancock  took  in 
large  revenues  but  was  always  under  heavy  expense  from 
pioneering  experiments  and  exorbitant  tolls.  He  testified 
that  one  of  his  coaches,  in  three  months*  service  on  the  Pad- 
dington  road,  covered  4,200  miles  and  carried  12,761  per- 
sons, without  mishap  or  serious  delay.  He  offered  to  carry 
mails  at  the  then  high  speed  of  20  miles  an  hour,  the  usual 
mail  speed,  attained  through  relays  of  horses,  being  12 
miles  an  hour  on  the  fastest  routes.  He  is  credited  with 
being  the  first  power-vehicle  designer  to  use  chain  trans- 
mission and  the  first  to  make  tight  metallic  joints.  His 
wedged  drive  wheels  are  also  considered  important. 

Not  far  behind  Hancock  in  the  point  of  impressing  the 
Committee  with  reliability  of  operation  was  Sir  Charles 
Dance.  Against  Dance  it  was  alleged  that  his  steamer  was 
noisy  and  dangerous,  dropping  coals  and  driving  horsemen 
and  teams  into  the  fields. 

18  The  Turning  Wheel 

Another  interesting  development  of  the  Committee  hear- 
ings was  the  reappearance  of  Captain  Dick  Trevithick,  to 
say  that  he  had  a  new  boiler  with  a  condenser  attached,  so 
that  the  same  water  could  be  used  over  and  over. 

With  full  information  before  it,  the  Select  Committee  of 
Commons  reported  that  it  was  convinced  that : 

1.  Carriages  can  be  propelled  by  steam  on  common  roads  at  10 
miles  per  hour. 

2.  That  at  this  rate  they  have  conveyed  upwards  of  14  persons 
per  vehicle. 

3.  That  their  weight,  including  engine,  fuel,  water  and  attendants, 
may  be  under  three  tons. 

4.  That  they  can  ascend  and  descend  hills  of  considerable  inclina- 
tion with  safety  and  facility. 

5.  That  they  are  perfectly  safe  for  passengers. 

6.  That  they  are  not   (or  need  not  be,  if  properly  constructed) 
nuisances  to  the  public. 

7.  That  they  will  become  a  speedier  and  cheaper  mode  of  convey- 
ance than  carriages  drawn  by  horses. 

8.  That  as  they  admit  of  greater  breadth  of  tire  than  other  car- 
riages, and  as  the  roads  are  not  acted  on  so  injuriously  as  by  the 
feet  of  horses  in  common  draught,  such  carnages  will  cause  less 
wear  of  roads  than  coaches  drawn  by  horses. 

9.  That  rates  of  toll  have  been  imposed  on  steam  carriages  which 
would  prohibit  their  being  used  on  several  lines  of  road,  were 
such  charges  to  remain  unaltered. 

A  clear  victory,  on  paper,  for  the  road  steamer  men!  If 
Parliament  had  seen  fit  to  follow  the  findings  of  the  1831 
report  with  appropriate  legislation,  Great  Britain  would 
have  led  the  world  in  motor  transport,  adding  greatly  to 
her  already  dominant  industrial  leadership.  England  had 
the  inventors,  the  roads,  the  capital,  and  a  clear  lead  in 
the  practical  operation  of  self-propelled  vehicles,  but  she 
surrendered  this  advantage  by  placing  the  new  industry 
under  handicaps  which  became  more  and  more  severe  until 
at  last,  by  the  Act  of  1865,  ^  was  decreed  that  no  power 
vehicle  could  use  a  highway  unless  it  was  preceded  by  a 
man  on  foot  carrying  a  red  flag.  Sometimes  the  rule  was 
relaxed  to  let  the  red  flag  be  carried  by  a  man  on  horse- 
back, as  is  still  done  on  Tenth  Avenue,  New  York,  in 

Evolution  of  Self-propelled  Vehicles     19 

advance  of  New  York  Central  freight  trains.  This  is  a 
stock  example  of  the  restraint  of  speed  and  flexibility  of 
transportation  by  insisting  that  the  old  methods  shall  con- 
trol the  new. 

Arbitrary  discrimination  in  tolls  was  in  itself  almost 
enough  to  drive  steam  carriages  from  English  highways; 
their  use  decreased  greatly  after  1836.  Britain  deliberately 
had  turned  her  back  on  progress  in  an  art  where  she  was 
once  ascendant.  It  has  been  said  that  an  English  Rip  Van 
Winkle,  falling  asleep  in  1831,  would  have  awakened  sixty 
years  later  in  a  world  little  further  advanced,  as  respects 
highway  transport,  than  that  in  which  he  fell  asleep.  The 
price  Britain  paid  for  this  unjust  interference  which  exerted 
state  influence  in  favor  of  stagecoaches  and  railroads  has 
been  enormous  in  loss  of  trade  and  prestige.  Because  of  this 
interference  France  and  America,  where  government  and 
public  opinion  both  favored  the  new  idea  in  transport, 
forged  ahead.  The  French  Academy  honored  inventors,  and 
the  French  public  was  favorable,  though  still  limiting  high- 
way speed  for  self-propelled  vehicles  to  four  miles  an  hour 
in  the  country  and  two  miles  in  town. 

America  at  the  very  beginning  of  power  transport  en- 
couraged transport  improvements  in  the  highway  field, 
falling  into  the  errors  of  repressive  control  much  later  than 
England.  Maryland  early  gave  Oliver  Evans  the  right  to 
use  its  roads  in  his  experiments.  One  of  the  first  American 
steam  carriages  of  record,  which  Thomas  Blanchard 
brought  out  on  the  streets  of  Springfield,  Massachusetts,  in 
1825,  so  far  commended  itself  to  the  Massachusetts  legis- 
lature that  Blanchard  secured  an  official  endorsement;  but 
he  could  find  no  buyers.  The  Kentucky  vehicle  which  Eng- 
land was  eager  to  hear  about  in  1819  seems  to  have  dis- 
appeared from  history,  and  we  have  but  a  faint  trace  of 
another,  which  one  T.  W.  Walker  of  Edgar  County,  Illi- 
nois, late  of  Vincennes,  Indiana,  is  said  to  have  made  and 
operated  in  1824  or  1825.  William  T.  James  of  New  York 
City  produced  one  steam  carriage  in  1829  and  another  in 
1830.  But  whatever  these  vehicles  were,  we  can  be  sure  that 
they  were  applauded  and  went  their  way  without  official 
interference,  because  such  interference  would  be  of  record. 

20  The  Turning  Wheel 

These  American  vehicles,  like  Evans'  early  efforts,  en- 
countered another  sort  of  handicap  which  was  effective  in 
discouragement — bad  roads.  America  was  still  in  the 
pioneer  stage  of  development;  few  city  streets  were  paved; 
in  the  country  the  roads  were  wretched,  and  even  in  the 
long-settled  East  they  remained  almost  impassable  in  wet 
weather.  This  country  of  magnificent  distances  turned  to 
railroads  as  an  easy  escape  from  mud. 

The  race  for  public  favor  and  use  between  the  steam 
railroaders  and  the  steam  highway  school  of  transport 
ended  in  victory  for  the  former  in  both  Great  Britain  and 
America.  There  remained  France,  blessed  with  a  splendid 
system  of  highways,  a  fertile  inventive  genius,  and  a  sport- 
ing element  both  in  the  aristocracy  with  means  to  finance 
experiments  and  in  a  public  which  relished  thrills. 

In  England  mechanical  transport  had  been  pushed  into 
the  fields.  From  Worby's  tractor  in  1841  clear  through  the 
'seventies  there  is  a  steady  development  of  the  steam  trac- 
tor under  the  encouragement  of  certain  great  English 
landlords.  There  were  also  some  notable  developments  in 
the  highway  field,  but  since  use  of  the  highways  was  so 
restricted,  these  were  restricted  to  private  courses  or  back 
roads,  or  else  their  owners  were  compelled  to  a  "boot- 
leg" traffic,  eluding  the  authorities.  As  might  have  been 
expected,  various  enthusiasts  outwitted  the  authorities  by 
using  the  roads  illegally.  A  vehicle  which  has  received  a 
good  deal  of  attention  because  of  its  "bootleg"  operations 
was  the  Fly-by-Nlght,  a  steam  carriage  weighing  nearly 
seven  tons,  built  by  W.  O.  Carrett  of  Carrett  &  Marshall, 
Leeds.  After  it  was  publicly  exhibited  and  found  of  no 
legal  use,  Carrett  gave  it  to  Frederick  Hodges  of  the  Lon- 
don Distillery,  under  whose  ownership  it  acquired  its  gay 
reputation  and  name.  Filled  with  sporting  characters,  it  was 
run  at  night  in  defiance  of  the  authorities  and  in  this  way  is 
said  to  have  traveled  about  eight  hundred  miles  in  Kent  and 
Surrey.  After  being  summoned  for  excessive  speeds,  the 
owners  equipped  it  with  fire  hose  and  gave  their  passengers 
brass  helmets  to  wear,  escaping  in  this  way  arrest  at  the 
hands  of  village  constables.  At  length  it  was  necessary  to 
convert  the  Fly-by-Night  into  a  slower-moving  vehicle. 

Evolution  of  Self-propelled  Vehicles    21 

The  advance  of  the  mechanical  arts  in  England  during 
these  trying  years  may  be  briefly  indicated  by  listing  four 
quite  startling  innovations.  In  1833  Richard  Roberts  of 
Manchester  applied  differential  gearing  to  a  steam  car- 
riage, which  solved,  in  accordance  with  modern  practice,  the 
turning  of  corners,  thereby  escaping  the  necessity  of  having 
one  wheel  running  loose  on  the  turn,  which  could  hardly 
be  considered  safe. 

Far  ahead  of  its  time  was  William  Barnett's  contribu- 
tion to  the  internal  combustion  engine.  In  1838  he  invented 
a  double-acting  gas  engine.  Its  single  cylinder  was  vertically 
placed,  and  explosions  occurred  on  either  side  of  the  piston. 

Another  astonishing  invention,  considering  the  fact  that 
the  self-exciting  dynamo  was  not  invented  until  1871,  was 
the  electric  vehicle  produced  by  Robert  Anderson  of  Aber- 
deen, Scotland,  in  1839,  apparently  the  first  electric  vehicle 
in  the  world.  His  carriage  was  driven  by  a  primitive 
electric  motor  consisting  of  bars  of  iron  on  a  drum.  These 
were  drawn  around  by  electro-magnets,  "probably  on  the 
principle  of  some  old  toys  which  had  a  star  wheel  to  pro- 
duce the  necessary  make-and-break."  Gibson  thinks  it  was 
dependent  upon  intermittent  primary  cells. 

England  pioneered  also,  in  the  development  of  pneumatic 
tires;  at  least,  Robert  William  Thompson  was  the  first  to 
make  a  clear  patent  specification  of  the  pneumatic  principle. 

In  the  field  of  the  explosive  engine  France  assumed  the 
lead  after  1860,  when  Lenoir  of  Paris  made  a  gas  engine 
more  practical  than  Barnett's  English  effort  of  twenty-two 
years  earlier.  Lenoir  made  history  by  igniting  his  explosive 
mixture  with  a  spark  produced  through  the  use  of  an 
electric  battery  and  an  inductive  coil.  His  engine  started 
easily  and  was  fairly  quiet.  Used  to  drive  lathes,  printing 
presses,  and  water  pumps,  it  was  the  first  gas  engine  to  come 
into  commercial  use.  In  1862  Lenoir  placed  one  of  his  gas 
engines  in  a  vehicle  and,  using  street  gas  for  fuel,  success- 
fully drove  from  Paris  to  Joinville-le-Pont  but  was  always 
handicapped  by  low  speed  and  a  narrow  range  of  action. 

The  British,  clinging  manfully  to  steam  in  spite  of  the 
legal  restrictions  which  pressed  upon  them  more  and  more, 
created  some  notable  machines  in  the  decade  of  the  'sixties, 

22  The  Turning  Wheel 

being  encouraged  somewhat  by  the  hope  of  export  trade  and 
the  fond  expectation  that  the  road  restrictions  would  be 
eased  in  their  favor.  Instead,  however,  the  restrictions  were 

American  interest  lagged  through  the  middle  period,  but 
Richard  Dudgeon  of  New  York  built  a  steam  carriage 

Richard  Dudgeon's  steam  carriage,  New  York,  1860 

which  richly  deserves  notice  because  of  its  unusual  span  of 
life.  Put  into  storage  in  1866,  it  was  resurrected  in  1903 
and  even  then  ran  at  ten  miles  an  hour. 

The  early  evolution  of  the  steam  car  has  been  traced,  and 
notice  taken  of  the  creation,  almost  stillborn  as  far  as  its  in- 
fluence on  inventive  activity  is  concerned,  of  the  first  electric 
vehicle.  To  these  two  grand  divisions  a  third  was  destined 
to  be  added  and  eventually  to  triumph  over  the  others  in 
popular  approval  and  use.  This  was  the  car  using  petroleum 
or  one  of  its  derivatives  which,  after  many  trials,  developed 
into  the  gasoline  car  of  the  present. 

Various  steps  in  the  evolution  of  the  internal  combustion 
engine  have  been  cited.  In  1866  Otto  and  Langen  of 

Evolution  of  Self-propelled  Vehicles    23 

Germany  opened  wide  the  door  to  the  evolution  of  the 
modern  high-speed  engine  by  inventing  their  famous  gas 
engine,  a  comprehensive  improvement  on  Lenoir's,  since  it 
used  only  one  half  the  fuel  of  its  predecessor.  In  1867 
Otto  and  Langen  were  granted  United  States  patents  on 
improvements  on  three  kinds  of  combustion  engines :  a  two- 
cycle  non-compression  engine,  a  two-cycle  compression 
engine  for  which  the  mixture  was  compressed  outside  the 
cylinders,  and  a  four-cycle  compression  engine.  The  last 
named  is  the  one  of  historic  importance,  as  its  cycle  of 
charging,  compression,  explosion,  and  expulsion  is  still 
adopted.  It  was  carried  along  from  gas  to  oil  by  Gottlieb 
Daimler,  an  associate  of  Otto  and  Langen,  whose  petrol 
motor  was  the  first  to  be  manufactured  in  quantity.3 

Nearly  twenty  years  were  required  for  Daimler  to  evolve 
his  1885  petrol  engine  from  Otto's  gas  engine  of  1866  but 
in  the  meantime  inventors  elsewhere  were  busy  in  other 
directions.  Todd  of  England  built  a  small  steam  carriage 
for  two  passengers.  In  the  same  year  Charles  Ravel  of 
Paris  attempted  to  propel  vehicles  with  gas  motors,  and  in 
this  country  Austin  constructed  a  small  car  in  Massa- 
chusetts which  was  exhibited  along  the  Atlantic  seaboard. 

A  year  later,  in  1871,  Dr.  J.  N.  Carhart  of  Racine,  Wis- 
consin, built  a  steam  buggy,  certified  to  by  J.  D.  Donald, 
Secretary  of  State  of  Wisconsin,  under  date  of  December 
14,  1914.  Dr.  Carhart  was  assisted  by  his  brother,  H.  S. 
Carhart,  Professor  of  Physics  at  Northwestern  University 
and  later  at  the  University  of  Michigan.  Compared  with 
the  foreign  machines  of  the  same  period  the  Carhart 
vehicle  must  be  rated  as  a  rather  crude  product.  In  par- 
ticular, it  revealed  the  curse  destined  to  beset  American 
inventors  for  many  years  to  come — that  of  viewing  the 
"horseless  carriage"  as  the  only  escape  from  the  horse 
itself.  For  at  least  twenty  years  more,  American  inventors 
in  the  self-propelled  vehicle  field  would  be  trying  to  fit 
engines  into  carriages  of  the  general  type  and  style  to  which 

3See  Chap.  Ill  for  a  further  discussion  of  the  evolution  of  gas  and  oil 

24      »  The  Turning  Wheel 

their  prospective  buyers  were  accustomed,  instead  of 
evolving  designs  better  suited  to  carry  their  power  plants. 

The  Carhart  experiments  seem  to  have  aroused  great 
local  interest,  for  in  1875  the  Wisconsin  Legislature  passed 
an  act  appropriating  $10,000  as  a  bounty  for  the  invention 
of  a  steam  road  wagon  which  would  meet  certain  tests  as 
to  performance  and  durability.  This  act  was  amended  sev- 
eral times,  but  $5,000  was  actually  awarded  in  1879. 

In  the  'seventies  France  began  to  move  definitely  toward 
assured  leadership.  In  Paris  Amadee  Bollee  built  a  number 
of  steam  omnibuses  which  enjoyed  a  long  and  profitable 
life.  Other  French  achievements  of  the  late  'sixties  and 
early  'seventies  are  Tellier's  ammonia  engine,  and  the  com- 
pression (not  internal  compression,  however)  motors  of 
Brothier  and  Carre.  Tellier  received  a  United  States  patent 
on  an  ammonia  engine  for  road  work  in  1871. 

Siegfried  Markus  of  Vienna,  at  an  isolated  point  as  re- 
spects the  art  in  general,  constructed  a  petrol  car,  but  some 
doubts  are  expressed  by  Lavergne  and  others  that  it  ever 
ran.  Markus  is  sometimes  credited  with  building  the  first 
automobile  in  1869;  elsewhere  the  date  is  given  as  1877. 
Like  so  many  other  claims  to  first  position,  this  one  would 
seem  to  rest  on  a  narrow  definition  of  the  word  "automo- 
bile," yet  even  that  word  had  not  yet  been  invented.  His 
experiments,  however,  no  doubt  stimulated  the  activities  of 
men  in  more  favorable  locations. 

In  1876  George  B.  Brayton,  an  Englishman  living  in 
Boston,  exhibited  a  petrol  engine  at  the  Philadelphia  Cen- 
tennial which  attracted  a  good  deal  of  attention,  as  it 
seemed  to  represent  a  distinct  advance  in  American  eyes. 
Described  in  the  Encyclopaedia  Britannica  as  the  first  engine 
to  use  "fuel  oil  under  compression  instead  of  gas,"  in  the 
end  it  proved  to  be  inferior  to  the  four-cycle  engine  then 
being  developed  by  Daimler  in  Germany.  Its  chief  sig- 
nificance for  us  lies  in  the  fact  that  George  Baldwin 
Selden,  a  patent  attorney  and  inventor  of  Rochester,  New 
York,  whose  keen  mind  foresaw  a  demand  for  small  self- 
propelled  vehicles  using  oil  fuel,  also  perceived  in  what  way 
the  basic  difficulties  involved  could  be  solved.  Selden  sent  an 
agent  to  Philadelphia  to  study  Brayton's  engine  and,  on  the 

Evolution  of  Self-propelled  Vehicles    25 

basis  of  using  a  similar  engine  as  motive  power,  drew  up  the 
specifications  which  accompanied  his  application  May  8, 
1879,  for  the  famous  Selden  patent  which  was  finally 
granted  to  him  in  1895. 

The  evolution  of  self-propelled  vehicles  has  been  traced 
from  the  first  mention  in  history  down  to  the  year  1879,  a 
dramatic  date  in  the  American  automobile  industry.  Steam, 
the  first  motive  power  of  artificial  origin,  came  close  to 
successful  application  on  highways  in  England  before  being 
blocked  by  adverse  legislation.  The  distant  beginnings  of 
the  internal  combustion  engine  and  the  beginnings  of  the 
evolution  of  the  oil  or  gasoline  engine  by  descent  from  the 
gas  engine,  have  been  noted.  While  it  is  impossible  to 
allocate  credit  accurately,  the  names  of  the  chief  contribu- 
tors are  here  recorded.4 

These  individuals  and  many  others  worked  in  an  atmos- 
phere beset  by  difficulties  to  an  extent  which  moderns  can 
scarcely  comprehend.  Under  the  circumstances,  the  wonder 
is  not  that  it  took  centuries  to  master  the  art  of  propelling 
wheeled  vehicles  by  power  plants,  but  rather  that  the  in- 
ventive spirit  persevered  in  these  men  so  strongly  that  the 
evolution  of  the  motor  car  proceeded  as  swiftly  as  it  did. 
Many  of  them  sacrificed  their  fortunes  as  well  as  their  lives 
to  the  great  task  of  advancing  in  some  degree  man's  mastery 
over  space  and  time. 

The  inventors  of  the  'seventies  could  see  that  the  rail- 
roads, despite  their  enormous  gains  in  mileage,  speed,  and 
dependability,  had  not  solved  the  transportation  problem. 
Tied  to  tracks  of  steel,  the  railway  lacked  the  flexibility 
necessary  to  make  rapid  transit  available  on  the  highways 
leading  everywhere.  Away  from  the  rails,  land  transport 
was  still  geared  to  the  horse,  as  it  had  been  from  the  days 
of  the  Pharaohs.  Goods  moved  swiftly  by  rail  from  depot 
to  depot,  but  away  from  depots  to  consumer  they  were  sub- 
ject to  the  ancient  lag  of  the  Dark  Ages.  In  particular,  rural 
America  lay  in  a  quagmire  of  mud  at  certain  seasons,  and 
even  under  good  weather  conditions  its  beauties  could  be  ex- 
plored by  few  city  dwellers.  Vast  regions  where  railroading 

4For  other  significant  dates  and  names  in  the  evolution  of  self-propelled 
vehicles,  see  Appendix  I. 

26  The  Turning  Wheel 

could  not  hope  to  pay  a  dividend  remained  in  a  backward 
condition,  almost  untouched  by  the  forces  of  progress  which 
steam  locomotion  had  brought  to  the  more  favored  areas. 

The  railroads  also  had  created  a  serious  social  problem 
not  foreseen  in  the  early  stages  of  their  development.  The 
advantages  which  they  offered  for  residence  and  manufac- 
turing could  be  reaped  only  near  their  stations  and  par- 
ticularly at  junction  points.  As  a  result,  cities  grew  to 
enormous  size,  were  densely  overcrowded,  and  slum  life 
became  an  appalling  reality.  To  relieve  the  congestion 
which  rail  transport  had  created,  other  rail  systems — first 
cable  cars  and  later  electric  trolleys — were  placed  in  opera- 
tion on  city  streets,  but  these  were  never  entirely  effective 
because  they  reproduced,  in  a  small  way,  the  same  influences 
which  the  railroads  brought  into  the  situation  in  a  larger 
way.  Suburbs  so  served  were  strung  out  thinly  along  lines 
of  transit  with  large  open  areas  between  them. 

The  man  of  1879  could  see,  as  the  man  of  1829  could 
not  see,  that  humanity  needed  more  than  ever  a  mode  of 
transportation  more  flexible  than  anything  tied  to  rails  and 
faster  than  the  horse.  The  railroad  had  extended  tremen- 
dously the  range  of  the  individual  and  the  productivity  of 
society,  but  clearly  it  did  not  satisfy  completely  the  instinc- 
tive demand  of  mankind  for  greater  freedom  of  action  and 
a  wider  radius  of  effective  toil,  trade,  travel,  acquaintance- 
ship, and  understanding. 

In  the  Lynds's  Middletown,  the  most  complete  picture  of 
the  evolution  of  an  American  community,  an  old  man  who 
had  entered  Indiana  on  an  ox  cart  is  quoted  as  saying  that 
he  can  put  the  cause  of  social  change  in  his  day  in  four 
letters — "A-U-T-O."  The  gasoline  automobile  in  1879  made 
its  first  appearance  in  American  history,  not  as  a  practical 
vehicle,  but  as  a  definite,  compelling,  and  driving  idea  under 
the  spell  of  which  many  men  would  labor  shrewdly  and  de- 
votedly to  compass  its  reality. 

Chapter   III 


I/THOUGH  American  inventors  hopefully  built  steam 
carnages  of  strange  design  at  intervals  from  1800  on,  it 
remained  for  George  Baldwin  Selden  in  1879  to  catch  the 
first  confused  vision,  on  this  side  of  the  water,  of  the 
modern  gasoline  motor  car.  A  shrewd  lawyer,  Selden  kept 
his  application  alive  from  1879  until  1895,  when  he  secured 
a  sweeping  patent — under  which  millions  were  collected  from 
automobile  manufacturers  until,  in  1911,  its  broad  scope 
was  limited  and  held  not  infringed  by  the  actual  types  of 
motor  vehicles  then  in  use.  (Columbia  Motor  Car  Com- 
pany vs.  C.  A.  Duerr  &  Co.,  184  Fed.  493.)  All  General 
Motors  cars  until  then  were  manufactured  under  licenses 
from  the  Association  of  Licensed  Automobile  Manufac- 
turers having  been  formed  to  exploit  the  Selden  Patent.  The 
litigation  ending  this  monopoly  is  the  most  famous  in  Ameri- 
can automobile  history. 

The  period  from  Selden's  application  of  1879  to  tne 
founding  of  Olds  Motor  Works  in  1899  measures  the  birth 
pangs  of  the  gasoline  automobile  in  America.  At  the  begin- 
ning of  that  period  the  French  were  leading  the  van  of 
automotive  progress;  at  its  close  America  had  caught  up 
and  was  poised  for  adventure  in  quantity  production. 

Economic  needs  have  a  way  of  permeating  society,  so 
that  it  is  a  commonplace  of  the  history  of  invention  to  find 
minds  far  distant  from  one  another  in  time  and  space, 
wrestling  with  the  same  problems  and  independently  pro- 
ducing results  roughly  identical.  In  the  long  and  intricate 


28  The  Turning  Wheel 

evolution  of  the  automobile  this  was  many  times  the  case. 
Advances  in  other  mechanical  arts  had  to  be  tried  and 
tested  by  time  before  they  could  be  adapted  to  transporta- 
tion. The  older  industrial  countries  necessarily  provided  the 
background  for  the  beginning  of  the  automobile's  march 
to  assured  success. 

Since  the  internal  combustion  engine  is  the  heart  of  the 
modern  automobile,  its  development  is  of  prime  interest. 
The  chief  American  name  is  that  of  Drake,  who  in  1855 
introduced  incandescent  metal  as  an  ignition  agent  for 
gaseous  mixtures.  Lenoir's  double-acting  gas  engine,  fired 
by  an  electric  spark,  came  into  practical  use.  Four  hundred 
of  these  engines  were  in  use  in  Paris  in  1865.  They  were 
quiet  and  smooth  in  action  but  expensive  in  fuel  consump- 
tion. With  the  year  1867,  when  Otto  and  Langen  intro- 
duced their  free-piston  engine  at  the  Paris  Exposition,  the 
gas  engine  approached  full  utility.  By  1876  Dr.  Otto  had 
applied  the  cycle  of  operations  proposed  earlier  by  de 
Rochas;  this  cycle,  now  known  as  the  Otto  cycle,  was 
worked  out  independently  because  de  Rochas  never  brought 
his  ideas  to  execution,  and  in  the  meantime  practical  dif- 
ficulties in  the  way  of  completion  along  his  lines  had  been 

The  affinity  between  gas  and  oil  engines  is,  of  course, 
close,  the  vapor  being  produced  from  oil  in  the  latter  in- 
stead of  being  present  as  constant  gas  as  in  the  former. 
The  first  practical  oil  engine  is  credited  to  Hock  of  Vienna 
in  1870,  but  his  product  was  not  a  commercial  success.  Bray- 
ton's  oil  engine,  working  on  the  constant  pressure  system 
without  explosion,  is  said  to  have  been  the  first  of  this  type 
to  use  oil  instead  of  gas. 

It  seems  impossible  to  determine  precisely  who  first  used 
an  oil  fuel  to  drive  a  motor  vehicle.  Gibson,  a  considerable 
authority,  says  that  Lawson  of  England  invented  an  engine 
in  1880  which  was  driven  by  the  explosion  of  gas  prepared 
from  gasoline  stored  in  a  receptacle  carried  on  the  vehicle, 
which  was  a  tricycle.  Worby-Beaumont  is  inclined  to  credit 
the  priority,  at  least  as  far  as  actual  propulsion  of  a  vehicle 
by  an  oil  motor  is  concerned,  to  Edward  Butler,  who  in- 
vented a  three-wheeled  motor  tricycle,  the  Petrocycle,  using 

The  Formative  Period 


benzine  or  benzoline.  This  machine  was  invented  in  1883, 
proved  in  1884,  and  exhibited  in  1885.  The  motor  had 
double-acting  cylinders  coupled  direct  to  a  single  power 
wheel,  and  burned  vapor  of  benzoline,  which  was  exploded 
electrically.  A  three-wheeled  oil  motor  carriage  by  Knight 
is  said  by  some  English  authorities  to  have  been  the  first 

First  motorcycle — oil  motor 

oil  motor  carriage  actually  to  run.  At  first  benzoline  was 
used  as  the  fuel,  but  later  the  engine  was  adapted  to  ordi- 
nary lamp  petroleum. 

In  France  the  early  'eighties  saw  the  earnest  efforts  of 
a  few  petrol  enthusiasts  to  enter  a  transportation  field 
where  steam-power  vehicles  were  at  their  highest  stage 
of  development  under  the  leadership  of  Comte  de  Dion  and 
his  associates,  Bouton  and  Trepardoux,  later  manufactur- 
ing as  De  Dion,  Bouton  &  Cie.  The  further  progress  of 
steam  was  assured  when  Leon  Serpollet,  in  1888—89,  in- 
vented his  "flash  generator,"  the  capillary  water  boiler 
known  by  his  name.  This  improvement  gave  steam  a  new 
lease  of  life  on  highways,  and  led  to  the  use  of  smaller 

30  The  Turning  Wheel 

steam  cars  of  which,  during  the  next  decade,  the  White 
and  Stanley  were  the  first  American  examples. 

In  1883,  Delamare-DeBouteville,  borrowing  an  idea 
from  Lenoir,  constructed  a  gas  tricycle  which  used  illu- 
minating gas.  A  year  later  DeBouteville  joined  with 
Malandin  in  building  a  petrol  car  which  the  French  claim 
was  the  first  to  operate. 

The  year  1885  furnishes  material  for  what  is  still  a 
bitter  controversy,  with  traces  of  nationalist  feeling  as  be- 
tween France  and  Germany.  In  that  year  Gottlieb  Daimler 
invented  his  famous  petrol  engine  in  which  the  vapor  from 
oil  was  burned  in  the  same  cycle  worked  out  by  Otto  for 
his  gas  engine. 

With  Gottlieb  Daimler's  appearance  in  the  internal  com- 
bustion field  we  approach  the  significant  application  of  the 
internal  combustion  engine  to  the  differentialized  wheel- 
and-axle,  which  has  given  us  the  modern  motor  car.  Until 
1883,  when  Daimler  conceived  the  construction  of  small 
high-speed  engines  with  light  moving  parts,  the  various  oil 
and  gas  engines  were  of  heavy  construction,  rotating  at 
150  to  200  revolutions  a  minute.  He  attained  800  to  1,000 
revolutions  a  minute  without  great  sacrifice  of  durability 
and  smoothness. 

The  French,  however,  have  put  forward  the  claim  of 
Fernand  Forest,  a  humble  but  excellent  mechanic,  who 
built  a  four-cylinder  motor  in  1885.  The  1885  motors  of 
both  Daimler  and  Forest  seem  to  have  done  excellent  work, 
but  Daimler's  came  into  commercial  use  in  1890  when  350 
were  manufactured  and,  throughout,  Daimler  was  far  more 
influential  than  Forest.  The  latter  deserves,  however,  an 
honorable  niche  in  the  annals  of  automobile  invention,  not 
only  for  the  work  he  did  on  motors,  but  also  for  the  im- 
provements which  he  made  in  carbureters.  Apparently 
without  question  he  should  be  credited  with  the  first  water 
jacket  constructed  to  warm  the  carbureter. 

In  Germany,  Daimler's  chief  rival  was  Carl  Benz,  who 
put  out  a  gasoline  tricycle  in  1885  which,  like  all  of  Benz's 
work,  was  strongly  built  and  satisfactory  in  use.  He  seems 
always  to  have  been  a  little  ahead  of  Daimler  in  putting 
the  gasoline  engine  into  road  work,  for  in  1886  he  matched 

The  Formative  Period  31 

Daimler's  "bone-shaker"  with  a  car  containing  several 
highly  progressive  features — a  device  allowing  variable 
speeds  and  an  automatic  control  of  the  gas  supply  through 
a  clutch  lever  operating  a  stop-cock.  This  car  developed 
fifteen  miles  per  hour.  The  Benz  car  of  1886  is  sometimes 
spoken  of  as  the  first  gasoline  motor  car,  but  this  can 
hardly  be  taken  literally,  although  it  was  certainly  a  great 
advance  on  its  predecessors  in  design  and  dependability. 
Daimler  soon  followed  with  a  four-wheel  motor  car,  but 
his  first  efforts  in  that  direction  were  not  as  successful  as 
those  of  Benz.  There  seems  to  be  no  clear  warrant  for 
the  statement  of  the  Encyclopaedia  Britannica  that  Daimler 
"ran  for  the  first  time  a  motorcar  propelled  by  a  petrol 
engine."  Daimler  certainly  had  the  correct  motive  means 
well  in  hand  by  1883,  even  if  he  did  not  apply  it  to  a  motor 
car  until  1886. 

Daimler's  light  and  fast  engine  thrust  itself  through  the 
field  of  invention  as  an  earthquake  heaves  a  new  mountain 
into  view.  M.  Levassor,  of  Panhard  &  Levassor,  secured 
the  French  patent  right  from  Daimler  and,  in  adapting  it 
to  highway  use,  fixed  many  of  the  trends  which  have  made 
the  automobile  what  it  is  today.  The  influence  of  cycle 
design  on  the  French  inventive  mind  freed  French  inventors 
from  the  obsession  of  carriage  design  which  dominated 
early  American  and  English  efforts — the  stagecoach  in 
England,  and  the  buggy  in  America.  Levassor  placed  his 
engine  in  front,  with  the  axis  of  the  crankshaft  parallel  to 
the  side  members  of  the  frame. 

The  drive  was  taken  through  a  clutch  to  a  set  of  reduction  gears  and 
thence  to  a  differential  gear  on  a  countershaft  from  which  the  road 
wheels  were  driven  by  chains.  With  all  recent  modification  of 
details,  the  combination  of  clutch,  gear-box  and  transmission 
remains  unaltered,  so  that  to  France,  in  the  person  of  M.  Levassor, 
must  be  given  the  honor  of  having  led  in  the  development  of  the 

This  solemn  verdict  of  Encyclopaedia  Britannica  seems  en- 
tirely justified.  America's  early  effort  to  use  the  Daimler 
engine  in  automobiles  was  made  by  William  Steinway  on 

32  The  Turning  Wheel 

Long  Island  in  1888.  Steinway  secured  the  American 
rights  and  spent  large  sums  on  mechanical  equipment,  but 
had  little  success. 

To  this  preeminence  of  France  in  the  history  of  effective 
motor-car  design  certain  conditions  which  America  at  that 
period  lacked  were  contributing  factors: 

1 I )  A  magnificent  system  of  highways  which  encouraged 
travel,  especially  cycling,  which  in  turn  led  to  an  efficient 
machine-shop  industry. 

(2)  An  open  and  friendly  attitude  on  the  part  of  the 
French  population  and  authorities  which  permitted  those 
highways  to  be  used  without  legal  restrictions  such  as  dis- 
couraged experiment  and  adaptation  in  England. 

(3)  The  approval  by  wealthy  French  sportsmen   and 
aristocrats,  who  from  the  beginning  gave  the  automobile 
both  financial  and  moral  support. 

In  England  the  development  of  self-propelled  vehicles 
had  been  greatly  retarded  by  adverse  legislation  and  the 
hostility  of  the  population.  Here  in  America  it  was  re- 
tarded by  wretched  highways,  the  indifference  of  finan- 
ciers, and  to  some  extent  by  the  hostility  of  the  public, 
particularly  of  the  farmers  who  were  later  to  become  the 
chief  beneficiaries  of  the  flexible  transportation.  Also,  the 
hard  times  of  the  early  'nineties  introduced  a  discouraging 
economic  factor  into  the  American  situation. 

For  these  reasons  and  others,  America  lagged  behind 
Europe  during  the  important  ten  years  following  the 
French  application  of  Daimler's  engine  to  road  transport, 
but  nevertheless  there  had  been  substantial  American  prog- 
ress. Through  the  growing  use  of  stationary  internal  com- 
bustion engines,  and  the  design  and  manufacture  of  marine 
engines,  both  American  inventors  and  a  portion  of  the 
public  worked  slowly  toward  the  predestined  goal.  The 
American  vehicles  which  took  the  road  were  chiefly  pro- 
pelled by  steam,  and  down  to  the  late  'eighties  they  showed 
little  if  any  advance  over  English  "steamers"  of  a  much 
earlier  day. 

A  direct  result  of  English  influence  would  seem  to  be  the 
four-wheeled  steam  car  produced  by  John  Clegg,  an  excel- 
lent mechanic,  English  born  and  trained,  and  his  son, 

The  Formative  Period  33 

Thomas  J.,  in  the  village  machine  shop  at  Memphis, 
Michigan,  which  the  younger  Clegg  still  operates.  Thomas 
Clegg  describes  this  vehicle  as  driven  by  a  single  cylinder, 
steam  being  produced  in  a  tubular  boiler  carried  in  the  rear 
of  the  car.  It  had  seating  capacity  for  four  persons,  includ- 
ing driver  and  stoker.  Cannel  coal  was  the  fuel.  Leather 
belts  were  used  to  transmit  power,  and  spring  adjustments  on 
them  provided  enough  play  to  let  the  car  negotiate  corners. 

R.  E.  Olds's  first  horseless  carriage  (steam) ,  constructed  1886—87 

This  machine  is  significant  as  the  first  self-propelled 
vehicle  on  record  as  being  built  in  Michigan,  now  and  for 
many  years  the  leading  state  in  the  Union  in  the  manu- 
facture of  automobiles.  The  reasons  for  Michigan's  rise  in 
the  automobile  world  will  be  examined  later.  The  great 
drive  of  the  Wolverine  State  to  leadership  in  the  industry 
presently  would  begin,  but  the  Clegg  "steamer"  neverthe- 
less created  hardly  a  ripple  of  excitement  beyond  a  twenty- 
mile  circle  of  rural  countryside  which  it  disturbed  with  its 
journeys  through  its  short  life  of  six  months.  Built  in  the 
winter  of  1884-85,  it  ran  perhaps  five  hundred  miles  in 
some  thirty  tests  during  the  succeeding  summer,  its  longest 
trip  being  to  Emmet  and  return,  a  distance  of  fourteen 

34  The  Turning  Wheel 

In  1887  Ransom  E.  Olds,  who  with  his  father  Pliny  Olds 
was  engaged  in  manufacturing  gasoline  engines  for  farm 
use,  drove  on  the  streets  of  Lansing,  Michigan,  a  three- 
wheeled  steam  vehicle.  Two  years  later  he  brought  out 
another  "steamer"  with  a  vertical  boiler.  The  Olds  steamers 
will  be  discussed  later. 

The  three-cornered  struggle  between  oil-and-gasoline, 
electricity,  and  steam  was  being  waged  all  over  the  world 
and  would  not  be  settled  for  another  fifteen  years.  No- 
where was  it  waged  more  hotly  than  in  America.  Each  of  the 
three  types  had  its  advantages  and  disadvantages.  Steam 
gave  smooth  acceleration,  but  it  carried  the  handicap  of  de- 
lay required  for  generation  beside  the  difficulty  of  carry- 
ing enough  fuel  for  a  long  trip.  Electric  propulsion  meant 
quiet  and  ease  of  operation  but  had  the  disadvantages  of 
extreme  weight,  limited  radius  of  operation,  and  long  waits 
for  battery  charging.  Oil  or  gasoline  as  fuel  meant  a  quick- 
starting  vehicle  and  large  reserve  power  in  comparison  to 
weight,  yet  the  early  vehicles  of  this  type  were  noisier  and 
more  complicated  in  their  operation  than  the  others.  While 
they  possessed  a  wider  range  of  action  and  more  adapt- 
ability to  road  conditions,  these  could  not  always  be  realized 
on  because  of  mechanical  difficulties.  They  did  possess,  how- 
ever, two  supreme  advantages  which  tended,  as  design  im- 
proved, to  give  them  supremacy.  The  fuel  they  used  was 
rather  widely  distributed  from  the  start,  and  this  distribu- 
tion could  be  and  was  easily  expanded,  so  that  nearly  every 
country  store  could  become  a  supply  station  for  motor  cars 
as  soon  as  demand  increased.  And,  secondly,  they  could 
be  built  at  a  price  to  fit  a  wide  range  of  pocketbooks,  a 
fact  of  supreme  moment  in  those  early  years  when  the 
measure  of  transportation  investment  was  the  cost  of  buy- 
ing and  maintaining  a  horse  and  carriage. 

In  1890  the  Olds  Gasoline  Engine  Works,  parent  com- 
pany of  the  oldest  unit  of  General  Motors,  was  incorpo- 
rated at  Lansing,  Michigan,  for  $30,000.  The  experience 
of  R.  E.  Olds  in  producing  gasoline  engines  there  would 
turn  him  soon  toward  automobiles  so  driven.  For  the 
present,  however,  Mr.  Olds  continued  his  experiments  with 
steam  power.  In  1891  he  produced  the  steam  horseless 

The  Formative  Period  35 

carriage  with  a  float  boiler,  which  machine  he  sold  to  India, 
thereby  consummating  the  first  recorded  sale  of  an  Amer- 
ican self-propelled  vehicle. 

In  spite  of  "hard  times,"  or  perhaps  because  of  the 
adversities  of  those  times,  inventors  in  transport  every- 
where were  busily  at  work  bringing  out  novelties  which 

R.  E.  Olds' s  first  factory,  River  Street,  Lansing,  Michigan 

soon  were  recognized  as  significant.  In  1891  Thomas  B. 
Jeffrey  patented  the  clincher  rim.  In  the  following  year 
Charles  E.  Duryea  and  his  brother  Frank  built  and  ran  at 
Springfield,  Massachusetts,  the  first  successfully  operated 
American  gasoline  car. 

This  car  is  preserved  in  the  Smithsonian  Institution.  The 
date  given  is  1892—93;  apparently  the  car  received  pre- 
liminary road  trials  in  1892  but  was  not  definitely  intro- 
duced to  the  public  until  1893.  It  weighs  700  pounds,  is 
propelled  by  a  4  horsepower  motor  weighing  120  pounds 
and  is  fittingly  described  as  a  "horseless  buggy."  It  set  a 
style,  as  well  as  inaugurating  an  industry.  America  was  so 
thoroughly  a  horse  country,  back  from  the  railroads,  that 
for  years  American  manufacturers  favored  carriage  styles. 
It  is  said  that  the  first  body  delivered  to  Packard  was 
equipped  with  a  whip-socket. 

Acutely  aware  that  the  American  market  did  not  want 
power  cycles,  American  producers  followed  Duryea's  ex- 
ample of  the  "horseless  buggy,"  paying  little  heed  to  the 

36  The  Turning  Wheel 

lead  given  by  Panhard  &  Levassor  in  Paris  in  creating  a 
design  fundamentally  different  from  both  cycle  and  car- 
riage. Levassor  revealed  the  full  possibilities  of  present- 
day  automobile  design  in  which  a  style  carriage  is  moved 
by  a  power  plant  placed  ahead  of  it  on  a  chassis,  but  Amer- 
ican manufacturers  for  years  to  come  would  still  be  re- 
producing buggies  as  closely  as  possible  and  hiding  their 
power  plants  in  narrow  spaces  beneath  the  seats.  Of  course, 
Panhards  were  expensive;  perhaps  no  country  lacking  a 
rich  and  sporting  aristocracy  such  as  that  of  France  could 
have  provided  a  broad  enough  market  for  them.  In  Amer- 
ica the  inventors  strove  from  the  first  for  cheaper  cars,  and 
while  their  initial  designs  were  faulty,  their  goal  was  one 
which  has  been  realized  so  fully  that  the  automobile  is  in 
possession  of  the  common  people  here  to  an  extent  matched 
nowhere  else  in  the  world. 

Elwood  Haynes  in  1894  and  R.  E.  Olds  in  1895  pro- 
duced gasoline-powered  cars,  the  latter  the  forerunner  of 
the  famous  curved-dash  runabout  which  in  a  few  years  was 
destined  to  become  the  first  American  car  produced  in  quan- 
tity. The  two-seater  Oldsmobile  in  the  National  Museum, 
while  highly  interesting  as  a  specimen  car  of  the  times 
(1897),  lacks  commercial  significance,  as  it  was  the  only 
one  of  its  kind  produced. 

Automobile  interest  the  world  over  was  tremendously 
stimulated  by  the  first  Paris— Rouen  race  for  motor  cars  in 
June,  1894,  and  the  Paris— Bordeaux  race  the  following 
year.  One  result  of  these  races  was  the  filing  of  500  appli- 
cations for  patents  on  all  varieties  of  self-propelled  vehicles 
at  the  United  States  Patent  Office.  In  the  1898  race,  the 
winning  Panhard  covered  726  miles  at  an  average  speed  of 
fifteen  miles  an  hour. 

America  owes  its  initiation  into  automobile  racing  and 
red-hot  automobile  news  to  H.  H.  Kohlsaat,  publisher  of 
the  Chicago  Times-Herald,  who  offered  prizes  for  the  first 
motor  vehicle  contest  ever  held  in  America.  After  being 
postponed,  the  race  was  finally  run  at  Chicago  on  Thanks- 
giving Day,  1895,  under  road  conditions  which  provided 
a  stern  test  for  the  entrants.  Snow  and  slush  filled  the 
streets,  which  were  soon  churned  into  "a  slough  of  mud" 

The  Formative  Period 


by  the  narrow  tires  of  the  competing  vehicles.  The  storm 
gave  the  public  excellent  proof  of  the  superiority  of  gaso- 
line-power over  horses,  steam,  or  electricity.  The  winning 
Duryea  "horseless  buggy"  covered  the  54.36  miles  of  the 
muddy  course  in  seven  and  one  half  hours,  despite  stops 
and  accidents  which  caused  sixteen  miles  of  extra  travel. 

The  horseless  buggy,  one  of  Charles  E.  Duryea  s  first  vehicles,  l8g3 

Noteworthy  is  the  fact  that  although  all  three  motive 
powers — steam,  electricity,  and  gasoline — contested,  the 
gasoline  cars  were  most  numerous  and  finished  one,  two,  and 
three.  Morris  &  Salom's  famous  Electrobat,  though  given 
a  prize  for  the  best  showing  in.  preliminary  tests,  could 
not  cope  with  the  harsh  weather  and  severe  going.  Duryea's 
victory  and  the  good,  showing  of  other  gasoline-type  cars 
helped  to  fix  in  the  American  mind  the  truth  that  the  most 
flexible  and  dependable  automobile,  in  all  weathers  and  on 
all  roads,  was  the  gasoline  car. 

38  The  Turning  Wheel 

So  impressed  was  the  race's  sponsor  by  the  achievements 
of  the  day  that  he  declared  his  faith  that,  in  five  years  more, 
Chicago  streets  would  show  five  automobiles  for  every 
horse.  Thanks  to  the  Chicago  race  the  American  auto- 
mobile had  been  launched  as  "news,"  and  it  has  continued 
to  be  news  ever  since. 

In  both  the  Times-Herald  Chicago  competition,  and  the 
French  races  of  the  'nineties,  gasoline  cars  had  proved  their 
superiority  over  both  steam  and  electric  automobiles  in 
those  qualities  most  suitable  to  the  American  scene.  They 
started  more  quickly  than  steam  cars  and  could  deliver  more 
power  per  pound  than  the  electrics.  Since  the  fuel  they 
consumed  could  be  found  at  almost  any  country  store,  their 
cruising  radius  was  limited  only  by  the  condition  of  the 
roads,  and  the  difficulty  of  making  repairs  when  wear  and 
tear  proved  too  much  for  their  mechanisms.  All  in  all,  the 
"horseless  buggies"  of  the  'nineties  were  seen  to  be  rough- 
and-ready  performers  capable  of  meeting  the  severe  tests 
of  wretched  American  roads  well  enough  to  augur  their 
future  ascendency. 

In  England,  Wallis-Tayler  might  say  that  steam  would 
eventually  carry  the  day  against  gasoline  and  electricity,1 
but  America  even  then  was  engaged  in  a  fury  of  develop- 
ment destined  to  overturn  his  solemn  verdict.  Between  1895 
and  1900  top  speed  for  gasoline  cars  rose  from  fifteen 
miles  an  hour  to  nearly  fifty,  and  problems  of  supply  and 
repair  were  being  solved.  Many  companies  had  sprung  up, 
searching  for  the  key  to  market  success. 

Looking  backward,  it  is  easy  to  see  the  main  outlines  of 
their  merchandising  problem,  but  to  the  pioneer  companies 
the  situation  no  doubt  had  its  puzzles.  There  was  an  avid 
public  interest  in  the  new  means  of  transport,  but  the 
country  was  still  depressed  as  a  result  of  the  bitterly  hard 
times  of  the  early  'nineties.  As  cars  one  by  one  appeared, 
they  were  bought  by  rich  folk  of  a  sporting  and  adventurous 

1<(There  can  be  little  doubt  that  the  vast  majority  of  people  would  prefer 
a  smooth-running,  reliable  steam  engine  for  use  as  the  propelling  medium 
of  a  pleasure  or  light  business  carriage,  to  the  evil  smelling,  dangerous, 
wasteful,  and  at  best  uncertain  and  unreliable  engine  heretofore  chiefly  em- 
ployed for  that  purpose  in  motors  of  recent  construction."  A.  J.  Wallis- 
Tayler  in  Motor  Cars  or  Power  Carriages  for  Common  Roads,  1897. 

The  Formative  Period 


turn  of  mind  who  sometimes  used  them  ruthlessly  on  the 
highways,  rousing  the  opposition  of  pedestrians  and  horse 
drivers,  whose  steeds  were  affrighted  by  the  noisy  novelty 
of  the  few  cars  they  met.  Unless  automobiles  could  come 
into  common  use,  so  that  an  individual  of  average  means 
could  look  forward  to  possessing  one  in  the  future,  there 
was  danger  that  the  small  boy's  "Get  a  horse"  would  be 
translated  into  restrictions  of  the  sort  which  had  blasted 
English  enterprise  two  generations  before. 

"Horsey*  Horseless  Carriage"  designed  by   Uriah  Smith   of  Battle 
Creek,  Michigan,  to  keep  Dobbin  from  shying  on  the  road 

The  extent  of  this  hostility  against  automobiles  in  the 
late  'nineties,  especially  marked  in  the  rural  sections,  can 
be  indicated  by  relating  the  fate  of  the  first  motorcar 
introduced  into  South  Dakota.  This  was  a  "home-made" 
horseless  wagon  planned  and  assembled  by  Louis  Green- 
ough  and  Harry  Adams  of  Pierre,  using  a  two-cylinder 
Wolverine  gasoline  motor  and  a  special  Elkhart  wagon, 
in  which  the  engine  was  housed  under  the  rear  seat  and 
power  transmitted  by  chains  to  the  rear  axle.  It  could  carry 
eight  persons  and  altogether  was  a  competent  vehicle,  which 
that  then  frontier  state  might  well  have  been  proud  to  wel- 
come as  a  home  product.  But  such  was  the  public  opposition 
that  Greenough  and  Adams  were  refused  the  right  to  carry 
passengers  for  hire  at  county  fairs,  which  was  their  only 

40  The  Turning  Wheel 

prospect  of  securing  prompt  returns  on  their  investment. 
At  Mitchell  they  were  refused  permission  even  to  bring 
their  machine  inside  the  town  limits.  The  Press  and 
Dakotan  voiced  the  public  verdict  when  it  said:  "It  is  a 
dead  moral  certainty  that  that  infernal  machine  will  frighten 
horses  and  endanger  the  lives  of  men,  women,  and  chil- 
dren. "2  So  the  checkmated  pioneers  of  motoring  gave  up 
their  efforts  at  a  time  when  it  was  painfully  clear  to  them 
that  motor  cars  would  be  an  unmixed  blessing  in  that  state 
of  vast  distances.  Like  hostility  manifested  itself  in  many 
other  parts  of  the  country. 

Obviously,  this  popular  distrust  of  the  motor  car  had  to 
be  overcome,  and  the  way  to  break  it  down  was  to  make 
automobiles  so  common  that  thousands  could  drive  them 
and  more  thousands  ride  in  them  daily;  then  horses  and 
humans  alike  would  grow  accustomed  to  their  passage; 
then  the  farmer  and  the  working-man  alike  would  learn  to 
look  upon  the  automobile,  not  as  a  rich  man's  toy,  but  as  a 
convenience  which  he  might  hope  some  day  to  possess.  The 
conversion  of  the  populace  would  begin  as  soon  as  any  con- 
siderable number  of  car  owners  started  taking  their  neigh- 
bors for  rides.  After  even  one  ride  the  small  boy  would  be 
on  fire  to  own  a  car  when  he  grew  to  be  a  man. 

Quantity  production,  it  is  now  clear,  was  the  key  not  only 
to  the  financial  success  of  the  industry  but  also  to  winning 
the  public  mind  away  from  its  traditional  enmity.  Only 
through  quantity  production  of  a  single  model  would  costs 
be  reduced  sufficiently  to  bring  the  automobile  within  reach 
of  the  average  American.  A  car  so  produced  had  to  be 
small  and  strong  and  simple.  The  first  manufacturer  who 
could  bring  a  car  of  that  kind  to  the  public  "at  a  price" 
would  score  an  immediate  financial  advantage  and  at  the 
same  time  clear  the  way  for  the  whole  industry  to  surge 
toward  large  proportions. 

The  first  company  to  take  that  most  important  step  was 
the  Olds  Motor  Works,  the  oldest  unit  of  the  General 
Motors  Corporation,  with  its  curved-dash  runabout.  The 
evolution  of  that  car  and  of  the  company  which  produced 
it  appears  in  the  next  chapter. 

^Encyclopedia  of  South  Dakota. 

Chapter   IV 


s  THE  twentieth  century  drew  near,  the  prospect  of 
high  fortune  for  those  manufacturers  who  could  build 
automobiles  in  quantity  rode  scores  of  ambitious  men  like 
a  witch,  stirring  them  to  extraordinary  efforts,  sleepless 
nights,  ceaseless  planning.  Their  customers,  the  devoted 
"automobiliers"  as  the  phrase  of  the  day  ran,  were  scarcely 
less  excited.  They  had  endured  the  jibes  of  a  prejudiced 
populace;  many  of  them  had. been  denied  the  use  of  streets 
and  highways  and  had  cheerfully  braved  arrest  to  win 
freedom  of  movement  for  their  fellows,  as  Dave  Hennen 
Morris  and  Augustus  Post  had.  done  in  Central  Park,  New 
York  City.  Bold  citizens  who  caught  a  glimpse  of  the  future 
not  only  braved  the  clutches  of  the  law  and  the  wrath  of 
mobs;  they  also  did  volunteer  publicity  work  for  the  cause 
of  motordom.  Mr.  Post  was  one  of  the  leaders  in.  this  field, 
assisting  in  organizing  and  publicizing  many  historic  con- 
tests, including  the  famous  Glidden  tours,  carefully  planned 
long-distance  endurance  runs,  annually  featured  from  1905 
to  1911,  for  a  trophy  presented  by  C.  J.  Glidden  of  Boston. 
Foreign  observers  returned  to  praise  American  initiative. 
In  London,  John  Munro  describes  the  encouragement  given 
to  motor-car  manufacturers  in  France  and  concludes  that 
the  French  army  will  soon  be  motorized.  With  clairvoyant 
sense,  he  foresees  the  "tank":  "We  are  in  a  measurable 
distance  of  the  ironclad  on  shore."  England  was  awakening 
from  lethargy  caused  by  earlier  legal  restraints;  London, 



The  Turning  Wheel 

he  observes,  has  an  Automobile  Club,  to  match  those  of  the 
United  States,  France,  Germany,  Austria,  Belgium  and 
Italy;  while  an  American,  James  Gordon  Bennett,  has  pre- 
sented a  cup  to  the  Automobile  Club  of  France,  to  be  com- 
peted for  yearly  by  cars  representing  clubs  from  both  sides 

The  Glldden  Trophy 


of  the  ocean,  the  first  race  to  be  held  in  France  in  mid- 
summer, 1900,  over  a  course  of  550  to  650  kilometers,  in 
150  kilometer  stages.  The  French  Academy  had  even  in- 
vented an  enduring  name  for  the  self-propelled  vehicle — 

American  developments  might  be  praised  by  foreign 
writers  but  the  American  reporters  on  the  state  of  the  art 
were  a  little  apologetic.  Writes  Ray  Stannard  Baker  in 
McClure's  for  July,  1899: 

Never  before  has  Yankee  genius  and  enterprise  created  an  important 
business  interest  in  so  short  a  time.  And  yet  the  motor  vehicle  in 

Oldsmobile  43 

America  is  in  its  babyhood.  .  .  .  Here  it  has  hardly  passed  the 
stage  of  promotion  and  promise. 

Notwithstanding  this  modesty,  the  achievements  re- 
corded in  the  same  article  might  be  considered  excuse  for 
letting  the  eagle  scream: 

Five  years  ago  there  were  not  thirty  self-propelled  carriages  in  prac- 
tical use  anywhere  in  the  world.  A  year  ago  there  were  not  thirty 
in  America.  And  yet  between  the  first  of  January  and  the  first  of 
May,  1899,  companies  with  the  enormous  aggregate  capital  of 
$388,000,000  have  been  organized  in  New  York,  Boston,  Chicago 
and  Philadelphia  for  the  sole  purpose  of  manufacturing  these  new 

At  least  eighty  establishments  .  .  .  200  types  of  vehicles,  with 
nearly  half  as  many  methods  of  propulsion. 

A  motor  ambulance  is  in  operation  in  Chicago ;  motor  trucks  are 
at  work  in  several  cities;  a  motor  gun  carriage  will  be  ready  for 
army  use  in  the  summer. 

The  Santa  Fe  railroad  has  ordered  a  number  of  horseless  coaches 
for  an  Arizona  mountain  route. 

A  trip  of  720  miles  has  actually  been  made  in  a  gasoline  carriage 
(Cleveland  to  New  York),  and  an  enthusiastic  automobile  traveler 
is  now  on  his  way  from  New  England  to  San  Francisco. 

Through  most  of  the  articles  of  the  time  runs  the  horse 
motif.  Some  might  lament  his  passing,  as  Chauncey  M. 
Depew  did  in  Horseless  Age,  1899:  "As  to  the  ordinary, 
everyday  horse,  he  is  certainly  doomed."  Of  course  Mr. 
Depew  put  no  time  limit  on  his  prophecy  and  it  may  yet 
come  to  pass,  but  on  the  record  Dobbin  has  outlived  the 
magazine  containing  his  sentence  of  doom.  Other  writers 
rejoiced  in  the  prospect  of  clean,  horseless  streets.  The 
statisticians  of  the  new  industry  worked  out  the  compara- 
tive costs  of  hay  and  gasoline,  harness  and  tires.  Their 
general  conclusions,  that  motors  were  as  economical  as 
horses,  seem  a  little  over-optimistic  when  one  observes  their 
neglect  of  depreciation  and  replacement,  which  was  then 
even  more  of  an  item  than  at  present. 

The  truth  that  here  was  a  new  transportation  tool  and 
not  merely  an  improvement  on  the  horse,  had  not  dawned 

44  The  Turning  Wheel 

even  on  the  industry  itself.  Its  leaders  thought  of  the  auto- 
mobile as  making  headway  only  through  putting  horses  out 
of  work,  whereas  the  fact  is  that  the  number  of  auto- 
mobiles increased  many  times  before  the  horse  population 
showed  signs  of  falling  off.  What  happened  was  this:  a 
more  efficient  use  of  human  time  lifted  the  productivity  of 
the  country,  bettered  man's  economic  life,  and  increased  the 
wealth  of  the  nation,  so  that  the  new  means  of  transport 
more  than  paid  its  way  without  prematurely  displacing  the 
equipment  already  available. 

Even  the  motor  poets  were  obsessed  by  the  horse;  a 
popular  verse  in  praise  of  the  motor-car,  declared: 

It  doesn't  shy  at  papers  as  they  blow  along  the  street; 
It  cuts  no  silly  capers  on  the  dashboard  with  its  feet; 
It  doesn't  paw  the  sod  up  all  around  the  hitching  post; 
It  doesn't  scare  at  shadows  as  a  man  would  at  a  ghost; 
It  doesn't  gnaw  the  manger  and  it  doesn't  waste  the  hay. 
Nor  put  you  into  danger  when  the  brass  bands  play. 

These  are  virtues,  but  after  all  they  are  negative  virtues. 
The  qualities  which  gave  the  automobile  a  chance  to  enter 
quantity  production,  after  its  long  experimental  evolution, 
were  positive  virtues — power  to  carry  persons  and  goods 
faster  than  they  had  ever  been  carried  on  highways  since 
the  dawn  of  time,  ability  to  overcome  bad  highways  until 
better  ones  could  be  built,  resistance  to  shock  and  stress, 
high  mobility  in  rural  areas  where  speed  had  never  been 
applied  before,  saving  precious  time,  widening  the  individual 
radius  of  action,  making  groups  more  effective  and  co- 
hesive, life  more  various,  thrilling,  and  productive.  These 
advantages  were  destined  not  only  to  substitute  the  auto- 
mobile for  the  horse  on  highways,  but  also  to  change  Amer- 
ica into  a  nation  of  travelers  moving  on  ever  improving 
highways  at  an  ever  increasing  tempo  toward  wider  and 
wider  horizons,  higher  and  higher  standards  of  living. 

Public  interest  was  rising:  how  could  it  be  maintained, 
exploited,  brought  to  bank?  Through  lower  prices,  obvi- 
ously. Yet  costs  and  prices  could  only  be  reduced  by  increas- 
ing volume.  But  who  dared  to  commit  himself  to  a  quantity 



production  program  which  would  absorb  all  one's  capital 
and  wreck  its  originator  if  the  goods  could  not  be  sold? 
There  seemed  no  escape  from  that  circle  except  gradual 
enlargement  of  volume,  an  opinion  expressed  by  one  of  the 
most  ardent  automobile  advocates,  W.  H.  Maxwell,  Jr., 
in  Metropolitan  Magazine  for  November,  1900.  To  grasp 

R.  E.  OLDS 

Father  of  the  Oldsmobile 

the  opportunity  required  high  courage;  to  win  the  leader- 
ship required  shrewdness  as  well.  There  was  only  one  man 
in  America  who,  in  1899,  refused  to  wait  any  longer  for 
the  "gradual  enlargement  of  the  volume  of  business." 
While  others  pushed  on  bit  by  bit,  Olds  Motor  Works  made 
the  leap  into  the  dark. 

Their  take-off  for  the  great  leap  was  Detroit.  Various 
explanations  have  been  given  for  Detroit's  position  in  the 
automobile  world,  but  the  one  that  seems  conclusive  is  this : 
In  Detroit,  the  Oldsmobile  early  proved  a  money-maker; 

46  The  Turning  Wheel 

hence,  the  pioneer  manufacturer  could  find  capital  support 
there  easier  than  elsewhere. 

To  accomplish  quantity  production  under  reasonably 
good  management  was  to  reap  profits.  Nothing  else  serves 
to  commend  an  industry  to  a  community  as  swiftly  as  a 
good  earning  record.  Detroit  early  became  automobile- 
minded,  and  for  that  the  City  of  the  Straits  has  the  Olds 
Motor  Works  to  thank,  since  it  was  the  Oldsmobile  which 
demonstrated  before  any  other  American  car  that  auto- 
mobiles could  be  made  and  sold  in  quantity,  and  fortunes 
reaped  from  their  manufacture.  Once  that  demonstration 
had  been  made,  Detroit  put  its  money  on  the  automobile, 
and  in  so  doing  began  its  population  climb  from  the  eleventh 
city  in  the  United  States  in  1900  to  the  fourth  city  in  1930. 

Another  factor  in  Michigan's  development  as  an  auto- 
mobile center  was  its  location  on  navigable  water.  Olds, 
Buick,  and  Leland — three  pioneers  of  the  industry — made 
gasoline  engines  for  marine  use  before  turning  to  produc- 
tion of  motor  cars. 

Bringing  Oldsmobile  to  Detroit  was  in  itself  the  result  of 
capital  investment  built  upon  an  astonishing  faith  in  the 
new  vehicle  of  transportation,  and  in  a  wealthy  old  man's 
confidence  in  a  young  man,  poor  in  purse,  but  rich  in  ambi- 
tion and  practical  ideas. 

The  young  man  was  Ransom  E.  Olds,  born  in  Geneva, 
Ohio,  in  1864.  With  his  father,  Pliny  S.  Olds,  a  competent 
mechanic,  he  came  to  Lansing,  Michigan,  and  though  little 
more  than  a  lad  worked  in  his  father's  machine  shop  in 
River  Street,  where  among  other  products  was  developed 
a  gasoline  engine  for  farm  and  marine  use.  By  the  time  he 
was  twenty-one  R.  E.  Olds  had  saved  $300,  and  putting 
that  into  the  business,  along  with  a  note  for  $800  at  8  per- 
cent interest,  he  became  a  half-owner  of  his  father's  busi- 
ness. In  1892  he  bought  out  the  balance  of  his  father's 
interest  and  incorporated  the  Olds  Gasoline  Engine  Works 
for  $30,000,  S.  L.  Smith  being  a  considerable  stockholder. 

Two  ideas  possessed  Olds.  One  was  to  improve  the  gaso- 
line engine :  to  that  end  he  invented  a  new  type  which  drew 
gasoline  directly  into  the  cylinder.  It  has  since  been  dis- 
carded in  favor  of  engines  using  air-and-gasoline  mixtures. 

Oldsmobile  47 

No  matter:  Olds  was  on  his  way.  The  other  idea  was  that 
of  putting  power  behind  wheels.  In  1887  he  had  produced 
and  driven  down  the  streets  of  Lansing  a  three-wheeled 
steam-power  horseless  carriage,  arising  early  to  avoid 
shocking  the  citizens  and  scaring  the  horses.  Lansing  was 
then  the  quiet  capital  of  an  agricultural  state.  The  city's 
population  was  only  2,000;  there  were  no  paved  streets, 
and  there  were  those  in  the  community  who  objected  to 
having  their  roads  used  by  horseless  carriages. 

Olds  went  on  from  his  three-wheeler  to  other  steamers 
of  the  more  practical  four-wheel  type,  reaching  depend- 
ability in  that  field  in  1893.  One  of  his  steamers,  equipped 
with  a  flash  boiler  of  Olds's  designing,  became  known  all 
over  the  world  through  an  article  in  the  Scientific  American, 
so  that  its  fame  reached  even  to  India,  resulting  in  its  sale 
to  the  Francis  Times  Company  of  Bombay,  India — cer- 
tainly the  first  sale  of  an  American  self-propelled  vehicle 
for  export  and  perhaps  the  first  American-made  passenger 
car  usold  for  value."  This  transaction  antedates  by  at  least 
five  years  the  Winton  sale  usually  listed  as  the  first  Amer- 
ican sale  of  an  American  motor  car,  and  in  the  meantime, 
Duryea  had  probably  sold  some  of  his  "horseless  buggies." 
As  we  have  seen,  a  number  of  steam  cars  had  been  pro- 
duced in  the  United  States  earlier,  but  no  authentic  record 
of  a  bona  fide  earlier  sale  than  this  one  is  available. 

A  Lansing  lad,  by  name  Roy  Chapin,  later  a  notable 
figure  in  the  automobile  world  and  Secretary  of  the  United 
States  Department  of  Commerce,  running  after  one  of 
Olds's  vehicles  then  and  there  decided  that  he  wanted  to  be 
an  automobile  man.  The  same  decision  was  being  made  by 
thousands  of  the  most  progressive  youths  of  his  generation. 
A  little  later  they  would  be  found  energizing  the  young 
industry  with  their  superb  vitality,  until  the  "automobile 
game"  became  the  phrase  describing  the  business  in  its 
most  energetic  and  resourceful  stride. 

But  after  all,  young  R.  E.  Olds's  experiences  with  steam 
were  a  side  issue.  His  livelihood  and  his  dearest  dreams 
were  centered  in  gasoline  engines.  After  four  years  of 
struggle  with  debt,  he  finally  stood  clear  with  enough  work- 
ing capital  to  feel  safe.  The  business  prospered  enough  to 


The  Turning  Wheel 

First  Oldsmobile,  1897,  now  on  display  at  Smithsonian  Institution, 
Washington,  D.  C. 

afford  a  margin  to  finance  experiments.  While  these  ran 
chiefly  to  steam,  it  was  inevitable  that  a  manufacturer  of 
gasoline  engines  would  eventually  abandon  steam  cars  for 
gasoline  cars.  In  actually  selling  a  steam  car  to  India,  Olds 
foresaw  market  possibilities;  but  concluded  that  the  future 
belonged  to  gasoline  rather  than  steam.  As  he  said  years 
later,  "The  gasoline  engines  were  our  bread-and-butter 
business,  and  most  people  thought  the  car  was  just  a  toy, 
but  I  knew  that  the  car  was  the  big  venture." 

This  reasoning  was  built  on  hard  experience  with  steam 
cars.  He  knew  that  boiler  troubles  would  eliminate  the 
"steamer"  as  a  popular  favorite,  as  soon  as  gasoline  cars 
could  be  simplified.  While  inexperienced  in  electrics,  he 
realized  they  could  not  cope  with  the  wretched  roads  of 
the  American  countryside;  and,  hence,  could  not  capture 
the  market  which  arose  in  his  imagination.  So  he  set  to  work 
to  apply  the  gasoline  engine  to  road  transportation,  as  sev- 
eral others  were  doing  in  other  parts  of  the  country. 



Facsimile  of  minutes  of  directors'  meeting,  August  21,  1897, 
authorizing  construction  of  first  Oldsmobile 

Olds  worked  hard  to  get  a  car  ready  for  the  Chicago 
race,  but  failed  to  complete  it  in  time.  However,  he  states 
that  it  was  finished  before  the  end  of  1895,  and  adds  these 
details:  "This  car  had  high  wheels  with  one-and-one-half 
inch  rubber  tires.  The  engine  formed  the  reach  and  was 
carried  on  the  running  gear." 

The  work  of  putting  Michigan  on  the  automobile  map 
as  the  first  quantity  producer  of  gasoline  cars  began  in  1895 
with  Mr.  Olds  as  the  chief  figure,  somewhat  assisted  by 
Frank  G.  Clark,  whose  father  owned  a  Lansing  carriage 
factory.  Mr.  Clark,  interviewed  in  1922,  states  that  he  and 
Mr.  Olds  worked  together  on  the  first  Oldsmobile  which 
appeared  in  1897  and  is  now  in  the  Smithsonian  Institution 
at  Washington.  This  car  was  the  fruit  of  two  years  of  ex- 
periments conducted  chiefly  after  their  regular  hours  of 
labor.  Mr.  Clark  claims  to  have  built  the  body,  and  testifies 
that  the  front  axle  was  made  in  the  carriage  shop  and  that 
he  and  Mr.  Olds  worked  together  on  the  spring  suspension 
and  drive.  The  correctness  of  this  narration  at  all  points 

50  The  Turning  Wheel 

is  questioned  by  Mr.  Olds,  but  the  appearance  of  Mr. 
Clark's  name  as  the  owner  of  127  shares  in  the  company 
which  Mr.  Olds  soon  formed  to  promote  the  new  car,  in- 
dicates that  there  was  collaboration  of  a  fruitful  kind. 
However,  Mr.  Clark  soon  left  the  venture,  and  to  Mr.  Olds 
goes  the  credit  of  making  a  commercial  success  of  the  enter- 
prise, as  well  as  for  the  mechanical  excellence  of  the  early 
product,  with  the  financial  assistance  of  S.  L.  Smith. 

Once  the  experiment  gave  assurance  of  success,  Olds 
organized,  with  the  assistance  of  bankers  whose  good-will 
he  had  earned  by  his  all  around  dependability,  the  Olds 
Motor  Vehicle  Company,  Inc.,  with  a  capital  of  $50,000 
divided  into  5,000  $10  shares.  Ten  thousand  dollars  had 
been  paid  in  when  the  papers,  dated  August  21,  1897,  were 
filed  on  September  9,  following.  The  purpose  of  the  com- 
pany was  stated  to  be  "to  manufacture  and  sell  motor 
vehicles."  At  the  first  meeting  of  the  board  of  directors, 
as  recorded  in  the  minutes,  Olds  was  empowered  to  "build 
one  carriage  in  as  nearly  perfect  a  manner  as  possible." 

The  1897  Oldsmobile  on  display  in  Washington  is  the 
oldest  General  Motors  car  in  existence.  It  carried  four 
persons,  on  two  seats,  both  facing  forward.  The  famous 
curved-dash  had  yet  to  make  its  appearance,  the  dash  on 
the  1897  model  being  angular  and  clearly  of  buggy  origin. 
This  car  is  the  only  one  of  that  model  and  year,  as  Olds 
Motor  Vehicle  never  reached  a  production  basis.  However, 
the  car  ran,  and  ran  remarkably  well  considering  the  handi- 
caps its  young  inventors  labored  under,  more  than  thirty- 
five  years  ago. 

Among  the  stockholders  of  Olds  Motor  Vehicle  was 
S.  L.  Smith,  a  copper  magnate  of  Detroit.  Mr.  Smith  de- 
serves to  be  remembered  as  the  first  man  of  large  means  to 
peer  into  the  future  of  Michigan  automobile  production, 
catch  a  glimpse  of  its  possibilities,  and  finance  a  new  venture 
in  a  large,  vital  way.  When  the  Olds  Motor  Vehicle  Com- 
pany was  later  united  with  the  Olds  Gasoline  Engine  Works 
to  form  the  Olds  Motor  Works,  S.  L.  Smith's  name  led  all 
the  rest  in  capital  contributed,  and  he  remained  a  power 
in  the  company  until  his  death.  The  Olds  Motor  Works 
came  into  being  as  a  result  of  his  backing. 

Oldsmobile  51 

For  some  time  Mr.  Olds  had  realized  that  Lansing,  as 
it  stood  in  the  late  'nineties,  was  not  a  practical  location 
for  a  large  manufacturing  establishment.  There  were  not 
enough  skilled  machinists  and  not  enough  houses  to  accom- 
modate an  influx  of  new  inhabitants.  The  Lansing  bankers 
already  interested  in  Oldsmobile  pulled  wires  in  the  East, 
and  sites  were  considered  as  far  away  as  Newark,  N.  J.  But 
when  it  came  down  to  cases,  Eastern  capital  still  fought 
shy  of  automobiles.  On  the  way  home,  therefore,  Mr.  Olds 
stopped  in  Detroit  to  discuss  the  situation  with  Mr.  Smith, 
already  one  of  his  stockholders.  The  old  but  vigorous  mil- 
lionaire, desirous  of  entering  his  sons,  Frederic  L.  and 
Angus  S.  Smith,  in  business  careers,  advised  locating  in 
Detroit  and  backed  his  advice  with  enough  cash  to  settle 
the  issue. 

The  Olds  Motor  Works  was  promptly  incorporated  for 
$500,000  on  May  8,  1899,  "for  the  manufacture  and  sale 
of  all  kinds  of  machinery,  engines,  motors,  carriages  and 
all  kinds  of  appliances  therewith."  The  place  of  operation 
was  designated  as  Wayne  County,  Michigan,  with  offices 
in  Detroit.  The  capital  stock  was  $500,000;  50,000  shares 
at  $10  par.  The  record  shows  that  S.  L.  Smith  held  19,960 
shares  of  the  20,000  originally  issued  and  paid  in,  the  other 
four  shareholders,  Olds  and  Sparrow  of  Lansing,  James 
Seager  of  Hancock,  Michigan,  and  F.  L.  Smith  of  Detroit, 
holding  ten  shares  each.  The  new  company  acquired  all  the 
assets  of  Olds  Motor  Vehicle  and  the  original  Olds  Gaso- 
line Engine  Works  of  Lansing,  Olds  Motor  Vehicle  being 
discontinued  February  29,  1900. 

In  some  sources  the  capitalization  of  1899  is  placed  at 
$350,000  with  $150,000  paid  in,  but  the  records  of  the 
Secretary  of  State  must  be  accepted.  The  difference  may  be 
that  between  shares  authorized  and  shares  sold,  a  residue 
of  $150,000  being  then  unissued.  Later  distributions  of 
stock  to  the  shareholders  of  the  original  company  gave 
Mr.  Olds  and  his  associates  substantial  holdings. 

Mr.  Smith's  wealth  and  reputation  drew  in  other  influen- 
tial Detroiters.  The  Company  gained  the  assistance  of 
Henry  Russel,  one  of  Detroit's  most  famous  attorneys, 
who  became  a  large  stockholder.  The  company  built  on 

52  The  Turning  Wheel 

Jefferson  Avenue  East,  near  Belle  Isle  Bridge,  where  the 
Morgan  &  Wright  plant  of  U.  S.  Rubber  is  now  located, 

First  factory  erected  in  United  States  for  automobile  manufacture. 
Olds  Motor  Works  plant,  Detroit,  Michigan,  begun  1899 

the  first  American  factory  especially  designed  for  auto- 
mobile production.  Of  his  early  trials  in  Detroit,  let  Mr. 
Olds  testify : 

It  was  our  plan  at  that  time  to  put  out  a  model  that  would  sell  for 
$1,250.  I  had  fitted  it  up  with  some  very  up-to-the-minute  improve- 
ments— pneumatic  clutch,  cushion  tires,  and  electric  push-button 
starter.  We  thought  we  had  quite  a  car,  but  we  soon  found  that  it 
was  too  complicated  for  the  public.  That  first  year  we  ran  behind 
about  $80,000. 

The  prospects  of  the  industry  were  not  very  bright.  Winton  was 
making  some  cars  down  at  Cleveland,  Ohio,  and  Duryea,  Haynes, 
and  Apperson  were  all  in  the  market.  But  the  public  persisted  in 
the  idea  that  it  was  not  a  practical  proposition  and  would  be  a 
thing  of  the  past  within  a  year  or  two. 

Finally,  after  a  long  sleepless  night,  I  decided  to  discard  all  my 
former  plans  and  build  a  little  one-cylinder  runabout,  for  I  was 
convinced  that  if  success  came  it  must  be  through  a  more  simple 

It  was  my  idea  to  build  a  machine  which  would  weigh  about  500 
pounds  and  would  sell  for  around  $500.  The  result  was  the  curved- 
dash  "Oldsmobile,"  weighing  700  pounds  and  selling  at  $65O.1  My 

*First  priced  at  $600;  soon  raised  to  $650.  Five  electric  cars  were  built 
and  sold  in  1899  and  1900. 

Oldsmobile  53 

whole  idea  in  building  it  was  to  have  the  operation  so  simple  that 
anyone  could  run  it  and  the  construction  such  that  it  could  be 
repaired  at  any  local  shop.  We  rushed  a  few  of  them  out  as  fast  as 
possible,  and  they  tested  out  so  well  I  decided  to  put  them  on  the 
market  immediately. 

We  sold  400  the  first  year,  which,  was  considered  a  wonderful 
achievement  for  that  period.  Having  felt  our  way  carefully,  I 
decided  that  the  only  plan  to  recover  from  the  slump  we  had  had 
the  first  year  would  be  to  come  out  with  an  announcement  that 
the  following  year  we  would  build  4,000  machines.  I  thought  this 
would  restore  confidence  in  the  industry  and  I  staked  all  on  the 
success  of  my  plan.2 

There  is  an  element  of  luck  in  most  successes,  and  what 
seems  bad  fortune  at  one  time  may  become  the  basis  of  later 
triumph.  Something  like  that  came  to  pass  in  the  fire  which 
destroyed  the  Olds  plant  on  March  9,  1901.  One  of  the 
workmen  at  the  new  factory  pulled  his  forge  underneath  a 
gas  bag;  the  gas  caught  fire,  and  in  an  hour  the  plant  was 
in  ruins.  But  Fate,  in  the  person  of  James  J.  Brady,  a  young 
timekeeper  who  was  later  to  become  one  of  Detroit's  lead- 
ing citizens,  rushed  in  and  rescued  the  only  curved-dash  run- 
about that  had  been  built.  It  was  the  one  tangible  asset  left. 
There  was  no  good  in  going  on  with  the  other  models;  they 
vanished  from  the  Olds  list  overnight.  Most  of  the  patterns 
for  the  new  runabout  had  been  burned,  but  new  patterns 
were  made  from  the  rescued  car.  Just  a  month  after  the 
fire  the  Olds  force  had  constructed  a  new  runabout  and 
drove  it  to  the  hospital  where  Mr.  Olds  lay  ill.  Before 
the  end  of  the  year,  more  than  400  of  the  famous  runabouts 
had  been  built  and  sold. 

The  fire  crisis  in  Oldsmobile  history  had  another  effect  on 
General  Motors  history.  To  hasten  the  resumption  of  pro- 
duction Oldsmobile  contracted  with  the  Leland-Faulconer 
Company  to  make  2,000  motors  for  the  runabout,  thus  in- 
troducing the  Lelands  into  the  automobile  business  and 
turning  their  thoughts  in  a  channel  which  led  directly  to  the 
creation  of  the  Cadillac. 

2Sketch  of  R.  E.  Olds  by  O.  D.  Foster  in  Automotive  Giants  of  America. 
B.  C.  Forbes  Publishing  Co.,  New  York,  1926. 


The  Turning  Wheel 

The  production  figures  of  Oldsmobile  one-cylinder 
curved-dash  runabouts  are,  in  round  numbers:  1901,  425; 
1902,  2,500;  1903,  4,000;  1904,  5,ooo.3 

In  addition,  6,500  one-cylinder  straight-dash  runabouts 
were  built  in  1905.  No  other  automobile  production  record 

Detroit  to  New  York  in  seven  and  one  half  days 
ROY  D.  CHAPIN  in  Oldsmobile,  igoi 

of  the  period  approached  this  one,  in  its  early  achievement 
of  quantity  production.  In  1902  when  Olds  was  building 
and  selling  3,299  cars,  and  when  he  could  have  sold  4,000 
if  suppliers  had  been  able  to  fill  his  orders,  less  than  1,000 
automobiles  were  registered  in  New  York,  the  richest  and 
most  populous  state  in  the  Union.  Among  the  leaders  in  the 
New  York  list  were  Oldsmobile,  Locomobile,  Mobile, 
Winton,  de  Dion,  Columbia,  and  Gasmobile.  No  Fords,  no 
Buicks,  no  Cadillacs,  and  no  Oaklands  as  yet. 

figures  are  agreed  upon  by  Messrs.  F.  L.  Smith  and  Roy  D.  Chapin. 
For  1901  and  1902  they  differ  somewhat  from  figures  on  unit  sales  as  fur- 
nished by  Olds  Motor  Works,  perhaps  because  marine  and  farm  engines, 
made  in  both  Lansing  and  Detroit,  may  have  been  included  as  "pieces"  in 
unit  sales.  \ 

Oldsmobile  55 

Oldsmobile  sales  in  New  York  City  took  a  great  surge 
forward  after  the  second  New  York  automobile  show  in  the 
autumn  of  1901,  to  which  Roy  D.  Chapin,  then  a  tester 
for  Olds  (he  would  presently  be  sales  manager),  drove  a 
curved-dash  runabout  from  Detroit.  This  was  the  first 
Detroit-New  York  trip  made  by  a  light  car. 

Well  equipped  with  spare  parts  when  he  left  Detroit, 
Chapin  needed  most  of  them  before  he  reached  his  destina- 
tion, as  the  wretched  roads  he  traveled  almost  shook  his 
light  car  apart.  He  was  forced  to  leave  the  muddy  high- 
ways, and  drive  along  the  towpath  of  the  Erie  Canal,  con- 
testing with  mule  teams  for  the  right-of-way.  His  night 
stops  were  Leamington  and  St.  Catharines  in  Ontario,  Ro- 
chester, St.  Johnsville,  Hudson,  and  Peekskill,  New  York. 
He  lay  up  for  major  repairs  at  Peekskill,  and  drove  into 
New  York  seven  and  one  half  days  after  leaving  Detroit. 
On  his  way  down  Fifth  Avenue  the  runabout  skidded  into 
the  curb,  damaging  one  of  the  wire  wheels,  in  spite  of  which 
he  made  his  haven  at  the  hotel  where  Mr.  Olds  was  anx- 
iously waiting.  The  doorman  would  not  admit  the  young 
man  in  his  greasy  garments,  and  Chapin  had  to  find  his  way 
around  the  building  and  sneak  in  unobserved  through  the 
servants'  entrance  to  find  his  employer. 

A  good  deal  of  social  history  is  compressed  in  that  in- 
cident— the  contrast  between  the  formal  East  and  the  free- 
and-easy  Middle  West,  the  tremendous  urge  and  surge  of 
young  America — typified  in  a  youth  of  twenty-one  attempt- 
ing something  that  had  never  been  done  and  being  trusted 
by  his  elders  to  "put  it  over." 

As  a  commercial  venture  the  drive  was  a  decisive  success, 
achieving  wide  publicity  which  enabled  Mr.  Olds  to  make 
a  contract  with  Ray  M.  Owen  to  sell  1,000  cars  in  New 
York  City.  Detroit's  sales  drive  on  the  rich  New  York 
market  had  begun. 

Detroit  occupied  no  prominence  in  the  industry  until  the 
Olds  Motor  Works  announced  a  production  of  4,000  cars 
in  1902.  In  that  year,  Detroit's  first  automobile  and  sport- 
ing goods  show  was  held.  Olds  displayed  a  car  already 

56  The  Turning  Wheel 

popular  while  the  Henry  Ford  Automobile  Company  dis- 
played a  Ford-Tom  Cooper  racer  never  successfully  brought 
into  production. 

Mr.  Ford,  years  afterward,  stated  that  he  had  been  ex- 
tremely lucky  in  his  competitors — they  had  left  him  prac- 
tically alone  in  the  field  under  a  thousand  dollars. 

"Within  a  few  years,"  said  Mr.  Ford,  "Olds,  Hupp, 
Buick,  and  E.M.F.  got  out  of  my  way,  one  by  one,  in 
something  like  that  order.  All  of  them  went  into  larger 
cars  after  making  a  success  of  small  ones.  I  recall  looking 
at  Bobby  Hupp's  roadster  at  the  first  show  where  it  was 
exhibited  and  wondering  whether  we  could  ever  build  as 
good  a  small  car  for  as  little  money." 

The  trend  of  early  manufacturers  toward  large  cars 
can  be  explained  as  due  partly  to  the  desire  for  more 
power  and  easier  riding  on  the  abominable  roads  of  the 
period  and  partly  to  the  desire  of  manufacturers  to  be 
represented  in  the  market  by  something  dignified,  costly  and 
well  designed.  At  any  rate,  Oldsmobile  production  in  1903, 
the  year  in  which  the  Ford  Motor  Company  was  organized, 
was  4,000  cars,  by  far  the  largest  production  schedule  of 
any  American  manufacturer.  A  clear  priority  on  quantity 
production  belongs  to  Oldsmobile. 

This  outstanding  achievement  by  no  means  reflected 
merely  good  fortune.  Partly,  of  course,  it  was  due  to  the 
fact  that,  underneath  the  hostility  of  many  persons  and 
sections,  there  existed  real  need  for  automobiles  and  an 
intense  interest  in  them.  Still,  the  business  had  to  be  pushed 
through  sales  and  advertising  pressure,  and  there  were 
grave  manufacturing  difficulties  to  be  overcome  owing  to 
the  imperfections  of  materials  and  the  haphazard  processes 
of  that  day.  Mr.  Olds  was  a  fortunate  combination  of 
commercial  sense  and  general  mechanical  ability,  but  he 
was  not  a  precisian  when  judged  by  latter-day  standards. 
His  big  job  was  to  get  goods  to  market;  the  whole  success 
of  his  venture  depended  on  that,  and  he  took  what  would 
now  be  considered  a  rather  rough-and-ready  view  of  en- 
gineering research.  He  told  Roy  Chapin  once  that  it  was 
time  to  correct  a  fault  when  the  fault  made  itself  evident 
on  the  road.  There  was  no  time  in  those  hectic  days  to  set 

Oldsmobile  57 

up  an  engineering  system  which  would  refine  the  car  in 
advance  of  need  or  consumer  interest. 

Even  on  this  dot-and-go  schedule,  extraordinary  strength 
and  durability  marked  the  Oldsmobile  curved-dash  run- 
about. We  have  seen  that  in  1901  Oldsmobile  was  the 
first  light  car  to  make  the  rough  passage  from  Detroit  to 
New  York.  In  that  same  year  Milford  M.  Weigle  and 
F.  L.  Faurote  introduced  into  the  United  States  postal 
service  a  wire-wheeled  Oldsmobile  runabout  which  is  said  to 
be  the  first  gasoline  car  used  in  any  postal  service  in  the 
world.  It  carried  mail  on  contract  under  tests  so  success- 
fully that  a  fleet  of  Oldsmobiles  was  soon  being  used  for 
that  purpose.  Credit  for  initiating  this  idea  of  the  auto- 
mobile in  postal  delivery  belongs  to  H.  H.  Windsor,  editor 
of  Popular  Mechanics  and  the  R.  F.  D.  News,  who  invited 
F.  L.  Faurote,  then  advertising  manager  of  the  Oldsmobile 
works,  to  address  the  annual  convention  of  rural  letter 
carriers  at  Indianapolis  in  1906. 

Mr.  Weigle's  reminiscences  are  one  of  the  best  records 
of  early  Oldsmobile  achievements  on  track  and  road.  In 
1902  he  won  the  blue  ribbon  for  piloting  an  Oldsmobile  in 
the  first  hundred-mile  non-stop  endurance  race  staged  in 
this  country.  Between  1902  and  1904  he  won  three  gold 
medals  and  twelve  silver  cups,  and  hung  up  in  succession 
several  world's  records  for  light  cars  on  dirt  tracks.  He 
recalls  being  arrested  three  times  for  driving  sixteen  miles 
an  hour  on  Broadway,  New  York  City,  when  the  speed 
limit  was  fifteen  miles  an  hour.  In  the  endurance  race  of 
1902  at  Chicago,  any  driver  who  made  a  speed  greater 
than  fifteen  miles  an  hour  was  disqualified. 

In  1903  the  Oldsmobile  Pirate  established  a  world's 
straight-away  record  for  making  five  miles  in  six  and  one 
half  minutes.  A  little  later,  H.  T.  Thomas  drove  the  same 
car  to  a  new  mile  record — the  first  American  car  and  driver 
to  cover  a  mile  of  space  in  less  than  a  minute.  In  that  year 
Oldsmobile  won  the  Tour  de  France. 

Perhaps  the  most  successful  of  Oldsmobile's  efforts  to 
make  America  automobile-minded  was  the  cross  country 
race  of  1905  from  New  York  to  the  Lewis  and  Clark 

58  The  Turning  Wheel 

Exposition  at  Portland,  Oregon,  where  the  good  roads  con- 
vention in  the  United  States  was  also  to  be  held.  The  drivers 
contested  for  the  honor  of  performing  the  first  transcon- 
tinental journey  across  America  in  a  light  car  and  for  a 
prize  of  $1,000  offered  by  the  company.  The  story  of  that 
adventurous  journey  is  one  of  the  liveliest  in  American 
motoring  records. 

The  cars  left  New  York  City  May  8,  1905,  driven  by 
Dwight  B.  Huss  and  T.  R.  McGargle.  Each  car  carried 
a  mechanic  who  assisted  in  the  driving,  Huss'  assistant 
being  Weigle,  an  Oldsmobile  driver  and  inspector  for  many 
years.  His  log  book  shows  Old  Scout  pulling  into  Portland 
on  June  21,  after  forty-four  days  on  the  road  for  a  total 
of  4,400  miles  and  an  average  of  one  hundred  miles  a  day. 
Some  350,000  persons  witnessed  the  triumphant  arrival  of 
the  victorious  car  which  had  not  only  traversed  rain-soaked 
stretches  of  gumbo  and  stormy  mountain  passes,  but  had 
also  ploughed  through  trail-less  wastes.  When  Old  Steady, 
delayed  by  even  worse  conditions  on  another  route,  ap- 
peared a  few  days  later,  the  staunchness  of  Oldsmobile  was 
demonstrated  beyond  all  doubt. 

In  the  same  car,  equipped  precisely  as  before,  Mr.  Huss 
repeated  his  New  York  to  Portland  journey  twenty-six 
years  later,  in  1931,  this  time  continuing  on  down  the 
Pacific  Coast.  On  Old  Scout's  second  expedition  across  the 
continent  he  found  hard-surfaced  highways  in  place  of 
mud  and  cattle  trails,  supply  and  service  stations  every- 
where along  the  line,  and  a  rousing  welcome.  Ten  million 
persons,  it  is  estimated,  inspected  the  ancient  Oldsmobile, 
which  was  displayed  under  the  auspices  of  every  major 
automobile  club  along  the  route.  Old  Scout  continues  in 
service.  A  feature  of  the  opening  of  the  building  erected 
by  General  Motors  for  the  Century  of  Progress  Exposition 
in  Chicago  was  the  appearance  of  Mr.  Huss  once  more  at 
the  tiller  of  this  famous  runabout,  which  he  drove  from 
Lansing  to  Chicago,  carrying  a  letter  from  the  Governor 
of  Michigan  to  the  Governor  of  Illinois. 

From  overseas  comes  the  tale  of  an  even  more  ancient 
Oldsmobile  owned  by  the  famous  Krupp  family  of  Ger- 
many and  still  in  service.  Efforts  to  secure  this  veteran  for 

Oldsmobile  59 

exhibition  purposes  in  Europe  have  failed;  Krupps  keep 
it  "on  the  job."  Other  distinguished  patronage  came  as 
soon  as  it  was  seen  that  a  quantity  production  and  low  price 
were  not  incompatible  with  quality.  Among  early  buyers 
were  the  Queen  of  England,  the  Queen  of  Italy,  Sir  Thomas 
Lipton,  Mark  Twain,  Chauncey  M.  Depew,  Maude  Adams, 
and  other  celebrities  in  all  walks  of  life.  But  even  more 
important  was  the  certainty  that  the  common  people  were 
being  initiated  into  the  idea  that  the  automobile  was  here 
to  stay.  The  country  doctor  drove  an  Oldsmobile  on  his 
rounds,  giving  more  prompt  service  and  extending  his  effec- 
tive range.  The  more  progressive  country  merchant  went 
to  call  upon  his  scattered  customers  in  an  Oldsmobile,  and 
kept  a  barrel  of  gasoline  handy  to  sell  to  other  motorists. 
Farmers  began  to  lose  their  hostility  to  the  new  mode  of 
transportation  as  they  saw  more  cars,  and  rode  in  them 
occasionally.  When  a  single  company  could  make  and  sell 
more  than  five  thousand  cars  in  a  year,  as  Olds  Motor 
Works  did  in  1904,  it  was  clear  that  America  was  on  its 
way  to  becoming  the  motorized  country  in  which  a  pedes- 
trian came  to  be  defined  as  a  person  on  his  way  from  one 
motor  car  to  another. 

Under  the  conditions  of  the  period,  the  infant  industry 
might  very  well  have  come  to  grief  financially,  since  banks 
were  cautious,  and  some  even  hostile,  toward  the  new  in- 
dustry. Olds  Motor  Works  survived  by  putting  the  first 
quantity  trade  in  automobiles  on  a  cash  or  C.O.D.  basis. 
Of  its  firm  stand  on  credits,  John  K.  Barnes  says: 

.  .  .  the  industry  profited  greatly  by  it.  [Olds]  explained  to  his 
agents  that  it  was  also  to  their  advantage  to  get  their  money 
when  they  delivered  the  cars.  Then  the  purchasers,  he  pointed  out, 
would  be  more  careful  how  they  used  the  cars ;  they  would  not  run 
them  into  the  ditch  when  something  went  wrong  and  telephone  the 
agent  to  go  get  the  car.  That  is  one  of  the  reasons  why  the  in- 
dustry as  a  whole  has  come  through  past  periods  of  business  de- 
pression with  little  difficulty. 

The  Company  had  a  care,  too,  for  the  consumer,  not 
merely  as  a  prospect  but  also  as  a  user  after  the  sale  had 
been  made,  a  point  of  view  then  new  to  business  but  one 

60  The  Turning  Wheel 

that  has  been  followed  consistently  by  the  whole  automobile 
industry,  with  an  emphasis  on  "service"  conditioning  the 
whole  relationship  of  the  manufacturer  and  the  market. 
One  of  the  first  of  these  service  efforts  was  the  famous 
Oldsmobile  "Don'ts." 

Finding  it  necessary  to  instruct  the  uninitiated,  Olds- 
mobile  issued  these  "Don'ts,"  the  mere  recital  of  which 
indicates  the  abysmal  ignorance  of  the  1900  public  on  things 
motor-wise : 

Don't  take  anybody's  word  for  it  that  your  tanks  have  plenty  of 
gasoline  and  water  and  your  oil  cup  plenty  of  oil.  They  may  be 

Don't  do  anything  to  your  motor  without  a  good  reason  or  with- 
out knowing  just  what  you  are  doing. 

Don't  imagine  that  your  motor  runs  well  on  equal  parts  of  water 
and  gasoline.  It's  a  mistake. 

Don't  make  "improvements"  without  writing  the  factory.  We 
know  all  about  many  of  those  improvements  and  can  advise  you. 

Don't  think  your  motor  is  losing  power  when  clutch  bands  need 
tightening  or  something  is  out  of  adjustment. 

Don't  drive  your  "Oldsmobile"  100  miles  the  first  day.  You 
wouldn't  drive  a  green  horse  10  miles  till  you  were  acquainted  with 
him.  Do  you  know  more  about  a  gasoline  motor  than  you  do  about 
a  horse  ? 

Don't  delude  yourself  into  thinking  we  are  building  these  motors 
like  a  barber's  razor — "just  to  sell."  We  couldn't  have  sold  one 
in  a  thousand  years,  and  much  less  5,000  in  one  year,  if  it  hadn't 
been  demonstrated  to  be  a  practical  success. 

Don't  confess  you  are  less  intelligent  than  thousands  of  people 
who  are  driving  Oldsmobiles.  We  make  the  only  motor  that 

Early  Oldsmobile  advertising  reflected  the  manufacturer's 
natural  desire  to  convince  a  nation  of  horse  drivers  that  his 
product  could  be  used  as  cheaply  and  generally  as  the  older 
means  of  transportation.  Illustrations  frequently  showed 
automobiles  passing  horses  on  hills,  and  elaborate  tables  of 
figures  were  presented  to  prove  that  automobiles  would 
not  reduce  to  insolvency  a  buyer  accustomed  to  the  upkeep 
of  horses  and  carriages.  Gradually  the  automobile  men 

Oldsmobile  61 

forgot  the  horse.  Oldsmobile  advertising  began  confidently 
to  sound  the  message  of  the  automobile  for  its  own  sake. 

Oldsmobile  "firsts"  include: 

The  first  steps  in  modern  assembly  line  development  by 
improved  system  of  routing  materials  in  process. 

The  first  automobile  manufacturer's  house  organ — 
Motor  Talk. 

The  first  automobile  dealers'  house  organ — The  Olds- 
mobile  News  Letter. 

The  first  national  convention  of  dealers  gathered  by  an 
automobile  manufacturer,  held  at  Lansing,  1907. 

The  first  comprehensive  instruction  books  to  users. 

The  first  sales  manual  to  dealers. 

Among  the  newspaper  and  publicity  men  often  at  the 
Olds  plant,  and  helpful  in  getting  the  Oldsmobile  firmly 
entrenched  in  the  public  mind  were  Alfred  Reeves,  now 
general  manager  of  the  National  Automobile  Chamber  of 
Commerce,  John  P.  Wetmore,  then  automobile  editor  of 
the  New  York  Mail,  Joe  E.  G.  Ryan  of  the  Chicago  Inter- 
Ocean,  Edward  Westlake  of  the  Chicago  Evening  Post 
and  C.  G.  Sinsabaugh,  then  editor  of  Motor  Age,  and 
later  of  Motor,  Motor  Life,  American  Motorist  and  Auto- 
motive Daily  News.  These  and  other  automobile  editors 
and  advertising  men  organized  "The  Goops,"  an  informal 
organization  whose  publication  Goop-Talk  was  financed  by 
the  Smith  brothers  of  Olds  Motor  Works.  Oldsmobile  al- 
ways enjoyed  a  good  press.  Several  famous  advertising  men 
took  the  Oldsmobile's  message  to  the  public,  among  them 
A.  D.  Lasker,  later  head  of  the  Shipping  Board,  George 
Batten,  Charles  Brownell,  and  E.  H.  Humphrey. 

In  the  first  automobile  copy  to  appear  in  the  Ladies  Home 
Journal — a  one-column  Oldsmobile  advertisement — Olds- 
mobile  is  described  as  "The  Best  Thing  on  Wheels": 

The  ideal  vehicle  for  shopping  and  calling — equally  suitable  for  a 
pleasant  afternoon  drive  or  an  extended  tour.  It  is  built  to  run  and 
does  it. 

Operated  entirely  from  the  seat  by  a  single  lever — always  under 
instant  control.  The  mechanism  is  simple — no  complicated  ma- 
chinery— no  multiplicity  of  parts. 

62  The  Turning  Wheel 

A  turn  of  the  starting  crank  and  the  Oldsmobile  "goes"  with 
nothing  to  watch  but  the  road. 

Price     Including 

Mudguards     $650.00 

Each  part  of  the  mechanical  marvel  is  made  from  thoroughly  tested 
materials  of  the  highest  grade.  Built  in  the  largest  Automobile 
factory  in  the  world  by  the  most  skilled  motor  specialists  and 
guaranteed  by  a  firm  whose  twenty-three  years  in  Gasoline  Motor 
and  Automobile  Construction  stand  as  the  very  highest  guarantee 
of  mechanical  perfection. 

While  the  story  is  well  known  in  the  automobile  trade, 
the  general  reader  may  wonder  why  Oldsmobile  forsook  its 
position  as  the  outstanding  leader  in  quantity  production 
to  enter  into  the  manufacture  of  larger  and  finer  auto- 
mobiles. Several  versions  are  available,  but  the  true  one 
seems  to  be  this:  R.  E.  Olds  never  possessed  control  of 
the  company  bearing  his  name.  As  he  explains  it,  the  younger 
Smiths,  lacking  in  the  experience  gained  from  hard  knocks, 
wearied  of  making  cars  for  the  masses.  They  desired  to 
branch  out  in  the  direction  of  larger  and  more  luxurious 
cars,  forsaking  the  humble  curved-dash  runabout  with  its 
established  market,  for  a  more  ambitious  program.  It  is 
only  fair  to  state,  however,  that  the  Messrs.  Smith  foresaw 
strong  competition  in  that  field  from  the  rising  Ford  enter- 
prise and  also  anticipated  some  of  the  trends  toward  the 
more  elaborate  engineering  of  the  future  which  would  soon 
render  the  simple  Oldsmobile  of  the  Detroit  era  a  thing  of 
the  past.  At  any  rate,  a  division  of  opinion  arose  as  a  result 
of  which  Mr.  Olds  retired.  He  had  made  "his  million"  with 
almost  unparalleled  speed  once  he  got  under  way.  Only 
forty-one  years  of  age  when  the  break  came,  the  prospect 
of  a  little  leisure  appealed  to  him  after  twenty  years  of 
intense  effort,  and  he  retired  gracefully  in  1903,  being  suc- 
ceeded as  general  manager  by  Frederic  L.  Smith,  also  an 
aggressive  leader. 

However,  Olds's  reputation  had  reached  such  heights  that 
presently,  merely  for  the  use  of  his  initials — R  E  O — he  re- 
ceived a  large  stock  interest  in  the  newly  organized  com- 
pany of  that  name. 



The  Olds  Motor  Works  returned  to  the  place  of  its 
birth — Lansing.  Following  the  fire  of  1901,  a  Lansing  plant 
had  been  set  up  to  assist  the  Detroit  operations.  This  be- 
came the  chief  seat  of  activity  in  1905  and  the  nucleus  of 
subsequent  developments  in  which  Oldsmobile  has  since 
eclipsed  its  earlier  records.  Production  of  the  famous  run- 
about continued  but  experiments  in  other  directions  indi- 
cated the  new  management's  interest  in  larger  cars.  From 
1904  on  Olds  Motor  Works  pushed  export  trade,  doing 
business  in  Russia,  England,  France  and  Germany,  and 
becoming  the  first  American  automobile  company  to  do  a 
quantity  export  business  through  regular  dealers  and  direct 
sales  representatives. 

The  trend  away  from  the  one-cylinder  engine  of  runabout 
fame  began  promptly  in  1905,  with  the  launching  of  the 
"double-action"  Oldsmobile  with  a  two-cylinder  engine, 

Famous  Oldsmobile  curved-dash  runabout — 
America's  first  quantity  car 

which  instituted  a  steady  climb  toward  engineering  perfec- 
tion. In  1906  Olds  Motor  Works  exhibited  the  first  medium 
priced  four-cylinder  car  offered  to  the  public.  It  brought 
out  its  first  six-cylinder  model  in  1907  and  marketed  it  in 
1908,  but  the  "four"  remained  the  mainstay  of  production. 


The  Turning  Wheel 

In  1908,  when  the  newly  organized  General  Motors  Com- 
pany of  New  Jersey  bought  the  Olds  Motor  Works,  the 
production  was  1,055  cars>  °f  which  1,000  were  "fours." 
Clearly,  Olds  Motor  Works  during  the  years  following 
the  move  to  Lansing  had  not  operated  as  profitably  as  at 
Detroit.  Production  fell  from  5,000  units  in  1904  to  1,055 

Chauncey  M.  Depew,  at  wheel  of  Olds  runabout,  1904 

in  1908.  The  company  owed  S.  L.  Smith  more  than  a  mil- 
lion dollars  and  was  otherwise  not  in  healthy  condition. 
When  it  came  time  to  sell,  General  Motors  is  said  to  have 
paid  a  million  dollars  for  some  road  signs.  But,  of  course, 
the  names  on  the  road  signs  made  the  value,  as  the  buyers 
very  well  knew.  Oldsmobile  still  had  prestige  with  the  pub- 
lic, almost  as  much  in  1908  as  in  1905  when  Gus  Edwards 
was  moved  to  write  his  famous  song — the  only  automobile 
song  which  has  come  down  to  us  in  full  flavor  from  those 
distant  days,  uln  My  Merry  Oldsmobile."  A  few  bad  years, 
in  which  difficulties  of  new  designs  and  change  of  location 
had  to  be  overcome,  could  not  destroy  the  reputation  Olds- 
mobile  had  won  for  itself.  The  new  models  were  intrinsi- 
cally sound  in  design  and  the  Olds  plant  was  in  excellent 
condition.  All  that  Oldsmobile  needed,  at  the  lowest  turn 
in  its  fortunes,  seemed  to  be  the  magic  touch  of  a  salesman. 

Oldsmobile  65 

Oldsmobile  soon  speeded  up  to  the  General  Motors  tempo. 

Olds  Motor  Works  was  the  first  unit  purchased  by  Gen- 
eral Motors  after  W.  C.  Durant  formed  his  new  holding 
company  around  Buick.  Official  negotiations  began  on  Octo- 
ber 10,  1908,  though  the  leaders  had  been  talking  "deal" 
for  some  time.4  Mr.  Durant's  first  proposal  to  F.  L.  Smith, 
the  Olds  representative,  set  a  price  of  $5  a  share  on  Olds 
stock,  payable  four  fifths  in  General  Motors  Preferred  and 
one  fifth  in  General  Motors  Common,  other  obligations  of 
Olds  held  by  stockholders  to  be  paid  off  in  General  Motors 
Common  at  par.  Olds  Motor  Works  was  to  have  two  seats 
on  the  General  Motors  directorate,  and  General  Motors 
was  to  name  a  majority  of  Olds  Motor  Works  directors. 
This  was  not  accepted,  but  a  counter  proposal  by  F.  L. 
Smith  on  November  I2th,  which  called  for  $100,000  more 
than  the  original  offer,  clinched  the  big  deal.  This  settle- 
ment provided  for  the  delivery  of  152,530  shares  of  Olds 
Motor  Works  and  the  claims  of  S.  L.  Smith  for  $1,044,- 
173.89,  in  exchange  for  $1,654,293.89  in  Preferred  stock 
of  the  General  Motors  Company  of  New  Jersey  and  $i,- 
152,530  in  its  Common  stock.  Three  of  the  five  Olds  Motor 
Works  directors  were  to  be  designated  by  General  Motors 
which  agreed  to  protect  endorsers  of  Olds  paper  against 
loss  and  to  provide  working  capital.  General  Motors  ac- 
quired all  Oldsmobile  patents,  chief  of  which  were  those 
on  tires,  carbureters,  and  engines,  the  latter  specified  under 
the  names  of  Sintz,  Richards,  and  Scavenger. 

In  the  final  settlement,  more  Olds  Motor  Works'  shares 
"having  been  turned  over  than  the  number  specified,  the 
Olds  Motor  Works'  stockholders  received  $1,827,694  in 
General  Motors  Preferred,  $1,195,880  in  General  Motors 
Common,  and  $17,279  in  cash,  a  total  of  more  than 

The  leadership  which  Olds  Motor  Works  in  its  early 
days  gave  to  the  whole  automobile  industry  may  be  meas- 
ured not  only  in  the  production  figures  of  the  company 
itself,  but  also  in  the  school  which  it  provided  for  the 
budding  talents  of  men  who  since  have  arrived  at  positions 
of  influence  and  power.  Names  once  on  the  Oldsmobile  pay 

4F.  L.  Smith:  Motoring  Down  a  Quarter  of  a  Century,  p.  36. 

66  The  Turning  Wheel 

roll  recall  the  romance  of  the  motor  car's  early  history  in 
Detroit  and  Michigan.  A  list  of  graduates  from  the  Olds 
Motor  Works  "would  read  like  a  roll  call  of  the  captains 
of  the  automobile  industry."  In  addition  to  those  already 
named,  the  early  Oldsmobile  circle  included  as  employees 
or  suppliers : 

Roy  D.  Chapin,  president,  Hudson  Motor  Car  Co. 

Charles  B.  King,  said  to  have  been  the  first  man  to  drive 
a  gasoline  car  on  the  streets  of  Detroit. 

John  D.  Maxwell,  who  later  pioneered  the  Maxwell  car. 

Howard  E.  Coffin  of  the  Hudson  Motor  Car  Company 
and  the  "idea  father"  of  the  War  Industries  Board 
with  his  Council  of  National  Preparedness. 

H.  T.  Thomas,  later  chief  engineer  of  Reo. 

Carl  Fisher,  builder  of  the  Indianapolis  Speedway;  de- 
veloper of  Prest-O-Lite  Company. 

B.  F.  Everitt,  body  manufacturer,  and  William  E. 
Metzger,  master  salesman,  both  later  in  the  Everitt- 
Metzger-Flanders  Company. 

George  and  Earl  Holley,  developers  of  Holley  car- 

Benjamin  Briscoe,  founder  of  the  short-lived  United 
States  Motor  Company. 

Charles  B.  Wilson,  Olds  factory  manager,  organizer 
and  president  of  the  Wilson  Foundry  Company  of 
Pontiac,  at  one  time  the  world's  largest  producer  of 
automobile  castings.  Also  his  brother,  David  Wilson. 

Frederick  O.  Bezner,  R.  B.  Jackson  and  James  J.  Brady 
who  left  OldsmoBile  with  Chapin  and  Coffin  to  found 
Chalmers-Detroit,  later  Hudson. 

Charles  B.  Rose,  president,  American  La  France  and 
Foamite  Industries,  Inc.,  New  York  City. 

Charles  D.  Hastings,  chairman  of  the  Board  of  the  Hupp 
Motor  Company. 

John  F.  and  Horace  Dodge  (Dodge  Brothers). 

A  complete  list  of  the  Olds  pioneers  who  now  occupy 
prominent  places  in  the  automobile  industry  would  include 
at  least  150  names. 

Oldsmobile  67 

Olds  Motor  Works  was  a  training  school  for  men  whose 
later  activities  resulted  in  such  companies  as  Reo,  Hudson, 
Chalmers,  Hupp,  King,  Columbia,  Owen  Magneto,  Perfec- 
tion Springs,  and  others.  Furthermore,  Oldsmobile  orders 
for  material,  spread  through  the  machine  shops,  body 
works  and  supply  houses,  set  hundreds  of  wideawake 
Detroiters  to  thinking  how  they  could  supply  those  wants, 
improve  on  their  merchandise,  and  gather  part  of  the  golden 
stream  of  profits  which  Oldsmobile  had  started  in  their 
direction.  Detroit  rode  to  wealth  and  large  population 
down  a  path  in  the  direction  which  Oldsmobile  had  indicated. 

This  determining  influence  of  the  oldest  General  Motors 
unit  on  the  geography  of  motordom  and  the  industrial  his- 
tory of  America  is  now  clearly  acknowledged.  As  John  K. 
Barnes  wrote  in  the  Motor  World  of  April,  1921,  "It  was 
Olds's  success  in  Detroit  that  fixed  the  center  of  the  auto- 
mobile industry  in  that  city."  In  less  than  three  years  Olds 
Motor  Works  paid  105  percent  in  cash  dividends  and  its 
capital  stock  had  risen  to  $2,000,000.  It  is  equally  true  that 
Olds  Motor  Works  was  the  first  to  reach  quantity  produc- 
tion by  applying  the  progressive  principle  of  assembly  to 
the  manufacture  of  a  single  model  gasoline-engine-driven 
vehicle,  and  the  first  to  popularize  the  automobile  with  the 
American  people,  taking  it  from  the  classification  of  rich 
man's  toy  to  that  of  everyman's  servant. 

Chapter   V 


HILE  Oldsmobile  was  the  acquisition  by  which  Gen- 
eral Motors  first  challenged  the  attention  of  the  country, 
Buick  was  the  nucleus  around  which  W.  C.  Durant,  Buick' s 
chief  and  one  of  the  dramatic  figures  in  the  history  of  the 
industry,  built  up  the  far-flung  structure  destined  to  become 
known  the  world  over  as  the  "G.  M."  How  he  acquired 
control  of  Buick  and  made  it  a  leader  is  an  absorbing  story 
which  begins  with  David  D.  Buick,  man  of  many  talents. 

David  Dunbar  Buick,  whose  name  already  had  adorned 
the  front  of  more  than  two  million  motor  cars  when  he  died 
in  1929,  completely  realized  the  traditional  picture  of  the 
American  inventor.  He  was  a  man  of  brilliantly  progressive 
ideas,  native  mechanical  ability,  and  little  business  caution. 
Time  and  again,  he  sacrificed  the  certainty  of  present 
profits  to  experiment  expensively  with  new  ideas.  One  vic- 
tory gained,  he  was  always  ready  to  rush  on  to  another 
without  consolidating  the  ground  already  carried,  with  the 
result  that  his  finances  were  usually  strained  and  his  backers 
often  in  distress. 

Men  of  the  lovable  and  creative  type,  who  sowed  more 
benefits  than  they  could  reap  for  themselves,  bulk  large 
in  the  history  of  mechanical  progress.  They  were  scouts 
on  the  frontier  of  invention  in  the  early  days  of  the  auto- 
mobile industry;  they  penetrated  little  known  territory, 
pointed  out  trails  which  others  followed  to  their  profit,  but 
not  infrequently  they  were  unable  to  win  wealth  for 


Buick  69 

themselves.  Life  to  them  was  chiefly  an  opportunity  to  ex- 
periment. Many  men  of  this  sort  made  their  contributions 
and  were  forgotten,  but  Buick  remains  fixed  in  the  public 

Mr.  Buick  already  had  one  substantial  achievement  to 
his  credit  when  he  entered  the  automobile  field.  A  member 
of  the  firm  of  Buick  &  Sherwood,  manufacturers  of 
plumbers'  supplies  in  Detroit,  he  had  developed  a  method 
of  fixing  porcelain  on  metal,  which  is  the  key  to  the  low- 
priced  modern  bathroom.  A  steady-going  business  man 
would  have  realized  on  this  manufacturing  advantage  by 
sticking  to  bathtubs,  but  to  David  Buick  a  bathtub  must 
have  seemed  a  dead  and  inconsequential  thing  in  contrast 
with  the  gasoline  engines  which  had  long  engaged  his  eager 
and  inquisitive  mind  and  which  he  began  to  manufacture 
in  1900.  His  partner  Charles  Sherwood  was  also  of  an  ad- 
venturous turn.  When  Buick  Auto-Vim  &  Power  Com- 
pany was  established  in  Detroit  in  1901,  it  soon  absorbed 
the  resources  of  Buick  &  Sherwood  in  experimentation  and 
sales  efforts. 

"Auto-Vim,"  in  the  name,  had  significance,  as  David 
Buick  hoped  to  adapt  an  L-head  gasoline  marine  motor  of 
his  design  to  a  carriage.  The  company  made  these  L-head 
engines  for  boat  and  farm  use  with  some  success,  but  their 
slender  profits  were  spent  as  fast  as  earned.  Need  for  new 
capital  brought  about  the  organization  of  the  Buick  Man- 
ufacturing Company  in  1902,  with  Mr.  Buick  as  president, 
and  it  was  under  this  name  that  the  first  steps  were  taken 
in  the  development  of  the  "valve-in-head"  motor.  The 
L-head  motor  was  soon  scrapped. in  favor  of  the  new  motor. 

Several  excellent  engineering  minds  seem  to  have  con- 
tributed to  the  early  development  of  this  famous  motor, 
but  documentary  evidence  indicates  that  the  first  steps  were 
taken  by  Eugene  C.  Richard,  an  engineer  born  in  France, 
trained  in  Philadelphia,  and  connected  with  the  various 
Buick  organizations  for  more  than  a  quarter  of  a  century. 
A  contract  is  in  existence  between  Buick  Manufacturing 
Company  and  Eugene  C.  Richard,  dated  May  23,  1903, 
covering  his  employment  as  "designer  and  inventor  and 
head  of  the  3rafting  department."  Under  the  Richard 


The  Turning  Wheel 

patent  No.   771095    issued  to   the   Buick   Manufacturing 
Company  as  his  assignee,  one  of  the  allowed  claims  covered 

In  an  explosion  engine,  the  combination  of  the  cylinder-head,  of  in- 
duction and  deduction  valves,  having  their  stems  extending  through 
said  head.  .  .  . 

The  "valve-in-head"  engine  is  usually  associated  with  the 
name  of  Walter  L.  Marr,  who  entered  the  Buick  circle  a 
little  later  than  Mr.  Richard,  and  who  rose  through  many 
years  of  service  to  become  the  chief  of  the  Buick  Manu- 

First  Buick,  Detroit,  1902 

facturing  Company  and  one  of  America's  leading  auto- 
motive engineers.  He  it  was  who  gave  this  superior  motor 
its  distinctive  name.  Mr.  Marr  was  born  in  Lexington, 
Sanilac  County,  Michigan.  Six  years  after  he  went  to  work 
as  an  apprentice,  he  completed  a  one-cylinder  gasoline 
engine  on  the  Otto  cycle.  He  continued  his  experiments  in 
his  spare  time  through  many  years,  producing  six  different 
types  of  motors.  With  this  background  he  built  in  1898  a 
vehicle  successfully  driven  by  a  four-cylinder  gasoline  engine 
of  his  own  design.  It  is  described  as  having  some  very  novel 
electric  ignition  fixtures,  including  a  jump  spark  attachment. 
This  first  car  of  Marr's  was  built  at  Cleveland,  then  the 
oil  center  of  the  country,  and  in  it  he  traveled  to  various 

Buick  71 

nearby  manufacturing  cities  to  visit  other  designers  of  gaso- 
line engines,  chiefly  of  the  marine  type.  He  was  developing 
a  car  of  his  own  when  he  met  and  became  associated  with 
David  D.  Buick. 

In  the  early  part  of  1903  Buick  put  a  single  cylinder 
5  x  6"  horizontal  engine,  designed  by  Mr.  Richard,  into  a 
chassis  of  his  own  design.  A  little  later  a  two-cylinder  op- 
posed engine  was  substituted  for  the  one-cylinder  type.  This 
was  the  car  that  became  the  famous  Model  F  Buick,  after 
certain  changes  were  made  in  the  crank  case.  The  engine 
was  4-l/2  x  5"  and  had  its  valves  mounted  in  removable 
cages  in  the  cylinder  head. 

These  early  trials  and  tests  took  place  in  and  around  the 
small  factory  on  Holmes  Avenue,  Detroit,  and  apparently 
both  Mr.  Marr  and  Mr.  Richard  were  present.  Mr.  Richard 
was  engrossed  in  the  power  unit;  Mr.  Marr,  in  consultation 
with  David  D.  Buick  on  chassis  and  body  construction  and 
adaptations,  made  many  alterations  preceding  the  trial. 
Walter  Marr  was  an  extremely  ingenious  man  in  solving 
last-minute  problems.  By  the  time  he  came  to  Buick  he  had 
a  .grasp  on  the  practical  difficulties  involved  in  making  a 
staunch  and  dependable  self-propelled  vehicle.  He  had 
worked  diligently  over  the  uncertain  fuels  of  that  period, 
distilling  his  own  alcohol  and  petrol  spirits.  He  had  designed 
and  made  many  ingenious  tools  by  hand,  and  from  raw 
material  had  constructed  all  the  engine  and  chassis  parts 
for  several  cars. 

Mr.  Richard  was  Marr's  technical  superior  under  his 
contract,  but  it  is  unlikely  that  Richard  could  meet  as  well 
as  Marr  did  the  problems  presented  by  the  rough-and-ready 
assembly  methods  made  necessary  by  the  imperfect  mate- 
rials and  workmanship  of  the  period.  At  any  rate,  it  was 
not  long  before  the  positions  were  reversed  and  Marr  be- 
came chief  engineer.  In  that  position  he  clung  so  steadfastly 
to  the  "valve-in-head"  principles  that  he  became  the  chief 
figure  in  its  future  development. 

Bringing  the  Buick  car  this  far  along  had  strained  the 
resources  of  Buick  &  Sherwood,  and  they  had  borrowed  con- 
siderable sums  from  the  Briscoe  Brothers,  Frank  and  Ben- 
jamin, Jr.,  then  manufacturing  sheet  metal.  The  Briscoes 

72  The  Turning  Wheel 

took  an  interest  in  the  Buick  Manufacturing  Company  and, 
assuming  charge  of  its  finances,  changed  the  name  to  the 
Buick  Motor  Car  Company,  in  which  the  Briscoe  holding 
was  $99,700  out  of  $100,000,  as  the  Briscoes  felt  com- 
pelled to  assume  control  of  all  Mr.  Buick's  various  interests 
in  order  to  protect  themselves.  Unable  to  carry  the  load  any 
longer,  the  Briscoes  determined  to  sell  the  Buick. 

The  Buick  Company  was  on  the  market.  Who  would  buy 
it?  Remember  that  in  1903  the  American  automobile  indus- 
try represented  chiefly  hopes  and  dreams.  A  great  many 
persons  had  lost  money,  and  few  had  profited.  Olds  was 
the  only  quantity  producer  and  money-maker  in  the  gaso- 
line field.  Leland  &  Faulconer  had  prospered,  but  the 
Cadillac  Motor  Car  Company  was  still  unborn.  Henry  Ford 
was  just  getting  the  Ford  Motor  Company  started.  Bankers 
looked  askance  upon  the  industry,  and  there  was  no  reason 
why  the  investing  public  should  risk  capital  on  new  enter- 
prises of  such  grave  uncertainty. 

In  the  end  the  sale  of  Buick  was  effected  largely  by  acci- 
dent, and  a  freakish  chain  of  circumstances  resulted  in  a 
startling  change  in  the  way  of  life  for  a  whole  section  of 
Michigan.  Visiting  relatives  in  Flint,  Frank  Briscoe  heard 
from  Mr.  Dwight  T.  Stone,  a  local  real-estate  man  and  son 
of  one  of  Flint's  early  industrialists,  of  a  prospect  named 
James  H.  Whiting,  who  might  be  interested  in  the  white 
elephant  that  Mr.  Briscoe  had  on  his  hands. 

Flint  was  then  a  city  of  less  than  14,000  inhabitants,  a 
pleasant  county  seat,  located  on  a  flat  plain  where  two 
railroads,  the  Grand  Trunk  and  the  Pere  Marquette,  hap- 
pened to  cross.  From  the  standpoint  of  physical  geography, 
it  held  no  advantages  over  the  other  county  seats  similarly 
located  in  central  and  southern  Michigan.  To  this  day 
Flint  is  a  city  whose  rise  to  world-wide  fame  confounds  the 
economic  geographers,  but  to  one  who  knows  its  history,  the 
causes  of  that  rise  are  evident.  Flint  was  located  at  the  ford, 
or,  as  the  French  explorers  and  trappers  called  it,  the 
Grand  Traverse  of  the  Flint  River,  whose  upper  reaches 
extended  for  many  miles  through  one  of  the  best  stretches 
of  Michigan's  superb  pine  forests.  It  was  therefore  a 

Buick  73 

natural  site  for  the  location  of  lumber  mills.  For  a  genera- 
tion its  river  banks  resounded  with  the  whirr  of  buzz  saws 
and  the  stream  was  filled  for  miles  with  boom  impounded 
logs.  Fortunes  were  made,  Eastern  capital  was  attracted, 
and  the  citizens  of  Flint  became  accustomed  to  certain  ideas 
of  which  they  never  afterward  lost  sight.  They  saw  that  big 
business  had  its  advantages;  they  developed  an  extraor- 
dinary pride  in  their  community  and  the  success  of  their 
industries,  and  they  stood  ready  to  follow  daring  leadership. 

Before  lumber  vanished  from  the  scene  through  the  de- 
struction of  the  forests,  there  came  to  Flint  a  young 
Canadian,  William  A.  Paterson,  to  establish  in  1869  the 
city's  first  vehicle-manufacturing  plant.  At  first  Mr.  Pater- 
son  worked  at  his  forge  as  a  carriage  blacksmith,  but  one 
day  he  threw  down  his  sledge  and  decided  to  be  a  business 
man  instead.  The  carriage  industry  which  he  introduced 
there  grew  to  large  proportions,  as  one  firm  after  another 
was  founded  and  gradually  expanded,  until  Flint  became 
one  of  the  great  centers  of  the  country  for  the  manufac- 
ture of  popular-priced  vehicles.  Assembly  methods  were 
worked  out  which  have  quite  a  modern  ring;  as  competition 
increased  in  intensity,  these  methods  were  refined,  until  it 
is  possible  that  the  Flint  of  1895  led  the  country  in  the 
efficiency  of  factory  assembly.  Though  the  frontier  receded 
westward  and  raw  materials  near  at  hand  were  used  up, 
Flint  carriage  companies  were  nevertheless  able  to  main- 
tain themselves  down  to  the  time  when  the  automobile 
ended  the  Horse  Age. 

All  these  vehicle  manufacturers,  however,  saw  the  hand- 
writing on  the  wall:  the  automobile  would  drive  out  the 
horse.  One  of  the  first  to  recognize  this  was  James  H.  Whit- 
ing, president  of  the  Flint  Wagon  Works,  whose  plant, 
extensive  for  those  days,  covered  part  of  the  present 
Chevrolet  site  in  West  Flint.  Mr.  Whiting  was  a  cautious 
man  in  most  respects,  but,  foreseeing  the  eventual  throttling 
of  the  carriage  trade,  he  acted  with  what  must  now  be 
reckoned  a  quite  remarkable  boldness.  He  began  to  look 
about  for  a  car  which  might  become  the  basis  for  an  indus- 
try which  would  use  part  of  his  plant. 

74  The  Turning  Wheel 

Thus  far  Flint  had  had  no  luck  whatever  with  automo- 
biles in  a  commercial  sense.  Two  of  its  more  enterprising 
citizens,  Judge  Charles  Wisner  and  Dr.  H.  H.  Bardwell, 
had  built  experimental  cars  for  themselves,  but  neither  of 
these  gentlemen  ever  let  business  interfere  with  science,  and 
their  cumbersome  vehicles  merely  amused  a  populace  which 
thought  in  terms  of  wheels  and  hoped  against  hope  for 
practical  results.  It  looked  to  many  as  if  young  Alexander 
B.  C.  Hardy,  who  will  appear  in  this  tale  later,  had  "hit  it" 
with  the  dashing  Flint  roadster,  all  red  paint  and  shining 
brass,  which  he  had  begun  to  make  in  a  little  factory  down 
by  the  Grand  Trunk  tracks,  a  factory  once  devoted  to  the 
manufacture  of  the  now  almost  extinct  whip-socket.  Mr. 
Hardy  had  been  nerved  to  this  great  adventure  by  a 
visit  to  the  Paris  Exposition,  where  he  saw  how  far  French 
cars  were  ahead  of  American  cars.  Returning  home  he  mus- 
tered a  small  capital  and  soon  had  a  smart  roadster  ready 
for  the  market.  In  the  end,  however,  Hardy  was  forced 
to  liquidate,  largely  through  the  opposition  he  encountered 
from  the  owners  of  the  Selden  patent.  While  he  was  oper- 
ating, a  frequent  visitor  at  his  shop  was  James  H.  Whiting, 
and  undeterred  by  the  young  man's  lack  of  success,  Whiting 
kept  looking  longingly  for  an  automobile  to  manufacture. 

All  through  the  history  of  American  automobile  manu- 
facturing in  its  early  stages,  will  be  seen  shining  examples 
of  the  courage  of  ignorance.  Here  was  James  H.  Whiting 
already  well  along  in  years,  with  no  engineering  experience 
and  no  clear  conception  of  the  problems  involved  in  making, 
selling,  and  marketing  automobiles.  He  thought  that  cars 
could  be  sold  by  the  same  salesmen  who  went  out  to  sell 
buggies,  road  carts,  and  farm  wagons.  As  for  manufac- 
turing, he  would  buy  what  was  necessary,  put  it  together, 
paint  and  upholster  the  job — which  was  practically  the  pro- 
cedure in  carriage  manufacturing.  Other  concerns  no  better 
equipped  than  the  Flint  Wagon  Works  were  building  cars 
in  just  that  way,  so  why  shouldn't  the  Wagon  Works?  In 
due  course,  carnage  firms  discovered  that  building  and  selling 
motor  cars  was  an  entirely  different  business  from  making 
and  selling  carriages.  The  automobile  business  required  far 



more  capital  and  called  for  standards  of  mechanical  pre- 
cision beyond  anything  required  in  the  carriage  tracfe,  but 
all  that  remained  to  be  learned.  By  the  time  Frank  Briscoe 
wanted  to  unload  the  Buick,  James  H.  Whiting  was  in  a 
frame  of  mind  to  consider  negotiating  for  it.  Brought  to- 
gether by  Mr.  Stone,  Whiting  and  Briscoe  quickly  made  a 
deal  whereby  the  Buick  concern  sent  its  car  over  the  roads 

Original  Buick  factory  at  Flint,  Michigan,  1903—04 

to  Flint.  These  roads  were  so  bad  that,  in  order  to  nego- 
tiate the  65  miles  between  Detroit  and  Flint,  Buick  and 
Marr,  who  drove  the  car,  had  to  cover  115  miles,  with  every 
mile  a  test.  Machinery,  patterns,  and  dies  were  brought  to 
Flint  and  housed  in  a  small,  one-story  building  adjoining 
the  Wagon  Works.  The  two  concerns  then  formed  the  Buick 
Motor  Company. 

To  bind  the  bargain  quickly,  $10,000  was  borrowed  from 
Flint  banks  on  the  endorsement  of  a  number  of  prominent 
citizens.  Though  of  small  proportion,  this  deal  was  a  strik- 
ing example  of  community  morale  in  a  small  town.  Larger 
banks  and  endorsers  elsewhere  would  have  been  more 

76  The  Turning  Wheel 

cautious,  but  Flint  took  the  game  with  a  rugged  confidence. 

Benjamin  Briscoe,  Jr.,  will  be  remembered  as  one  of  the 
colorful  and  energetic  figures  in  the  early  days  of  the  indus- 
try, and  the  daring  promoter  of  the  United  States  Motor 
Company.  This  company  was  put  forward  as  an  automo- 
bile merger  planned  to  become  the  chief  rival  of  General 
Motors.  When  United  States  Motor  Company  collapsed, 
Mr.  Briscoe  must  have  regretted  his  sale  of  Buick  for  a 
song,  since  the  Buick  in  the  meantime  had  become  the  key- 
stone of  General  Motors. 

The  original  capitalization  of  $75,000  in  Buick  was 
financed  by  the  Flint  Wagon  Works'  declaring  a  dividend 
of  $75,000  which  was  paid  into  the  treasury  of  the  Buick 
Motor  Company,  which  in  return  issued  stock  to  the  Flint 
Wagon  Works  stockholders  and  also*  to  the  Buick  interest. 
David  D.  Buick  and  his  son  Thomas  received  1,500  shares 
between  them.1  The  other  large  stockholders  were  James 
H.  Whiting  with  1,505  shares,  Charles  M.  Begole  with 
1,000  shares,  George  L.  Walker,  725  shares,  William  S. 
Ballenger  with  707  shares.  Mr.  Begole  and  Mr.  Ballenger 
were  active  in  the  Flint  Wagon  Works  and  later  in  Chev- 

Buick  now  had  a  home  and  business  management  whose 
caution  would  be  likely  to  restrain  the  optimism  of  David  D. 
Buick  himself.  The  skeleton  of  an  organization  was  put 
together.  A  three-story  brick  building  was  begun,  which  at 
first  housed  all  of  the  company's  activities,  but  later  was 
used  only  for  motor  and  transmission  manufacture.  Old 
Buick  No.  i — sometime  later  called  No.  2 — still  has  a  sen- 
timental attraction  for  now  aging  employees  who  began 
their  careers  there.  Greatly  enlarged,  the  building  has  be- 
come part  of  the  Chevrolet  motor  plant.  Sixteen  cars  were 
built  in  1903,  37  in  1904,  priced  at  $1,200.  These  first 
Buicks  were  equipped  with  a  storm  front  curtain,  with  a 
large  celluloid  window  in  it,  to  protect  the  driver. 

The  $37,500  set  aside  for  development  had  been  ex- 
hausted, and  loans  had  been  made  to  carry  on  the  work. 
Mr.  Whiting  felt  that  a  younger  man  was  needed  to  master 

aMr.  Buick  left  the  Buick  Motor  Company  in  1906,  two  years  before  Gen- 
eral Motors  was  founded. 



this  new  business,  with  its  insatiable  appetite  for  capital  and 
its  crying  need  for  quick  decision.  By  this  time  he  perceived 
clearly  that  the  Buicks,  father  and  son,  were  neither  of  them 
business  men  and  that  their  chief  associates  were  likewise 
more  interested  in  mechanics  than  in  profits.  The  need  of 
the  moment  was  for  a  man  full  of  energy  and  vision  who 
also  possessed  a  keen  sense  of  market  possibilities  and  the 
courage  to  think  in  large  figures. 

First  Buick  car  built  at  Flint,  Michigan,  igos.  Model  A 

At  a  meeting  of  carriage  manufacturers  in  Chicago,  in 
1904,  Mr.  Whiting  told  F.  A.  Aldrich,  representing  the 
Durant-Dort  Carriage  Company,  of  the  difficulties  he 
faced  getting  the  Buick  Motor  Company  swinging  market- 
wise.  Mr.  Aldrich  advised  him  that  the  man  he  should 
interest,  the  one  man  who  fitted  the  specifications  and  was 
immediately  available,  was  William  Crapo  Durant.  "Billy" 

78  The  Turning  Wheel 

Durant  was  already  a  leader  among  his  associates  and  in 
the  opinion  of  Flint.  Born  in  Boston,  December  8,  1861,  he 
was  the  grandson  of  one  of  Michigan's  war  governors, 
Henry  H.  Crapo,  who  had  brought  to  Flint  part  of  the 
capital  amassed  by  his  thrifty  ancestors  in  New  Bedford, 
Massachusetts,  where  they  had  followed  the  sea  as  mariners 
and  shipbuilders  to  good  purpose  for  some  generations. 
Originally  of  French  stock,  the  Crapos  of  New  Bedford 
and  Flint  alike  were  rich,  prosperous,  and  able. 

From  boyhood.  uBilly"  Durant's  chief  interest  was  busi- 
ness. He  might  have  gone  East  to  college,  but  instead  went 
to  work  early  in  his  grandfather's  lumber  business,  one  of 
the  largest  of  the  many  large  lumber  mills  in  Flint.  Then, 
to  get  more  action,  he  branched  out  before  the  age  of 
twenty-one  into  insurance  with  an  agency  of  his  own.  That 
suited  him,  because  insurance  was  something  you  could 
go  out  and  sell.  No  waiting-  around  for  customers  to 
come  to  you,  as  in.  the-  store.  An  almost  feverish  activity 
possessed  him.  "Billy"  Durant  above  everything  needed 
action.  While  possessed  of  a  notable  faculty  for  remaining 
calm  in  the  midst  of  alarms,  he  seemed  to  require  dramatic 
tension  in  business.  Yet  he  had  also  the  power  of  concen- 
trating intently  on  work. 

All  this  both  Mr.  Whiting  and  Mr.  Aldrich  knew,  for 
W.  C.  Durant  at  forty-two  was  already  the  most  talked 
of  man  in  Flint.  As  they  discussed  his  availability  for  the 
automobile  business,  they  recalled  the  dramatic  entry 
Mr.  Durant  had  made  into  the  vehicle  field  some  fifteen 
years  before,  when  he  had  pioneered  the  road-cart  business 
which  provided  Flint  with  its  initiation  into  quantity  pro- 
duction and  salesmanship.  The  young  insurance  hustler  had 
bought,  while  in  Coldwater,  Michigan,  for  $50  the  patent 
rights  for  a  road  cart  which  carried  a  good  selling  point  in 
its  improved  suspension.  He  took  into  partnership  Josiah 
Dallas  Dort,  a  young  hardware  clerk,  and  the  new  firm  con- 
tracted with  W.  A.  Paterson  for  10,000  carts  at  $8  each. 

This  was  an  unheard-of  quantity,  calling  upon  the  manu- 
facturer to  adjust  his  plant  and  workers  to  a  new  system 
of  assembly  for  such  a  large  operation.  But  "Billy"  went 

Buick  79 

out  and  made  sales  rapidly  at  $12.50.  The  success-, of  this 
flyer  in  road  carts  induced  other  manufacturers  to  follow  in 
that  field  and  to  bring  to  it  and  other  fields  large-scale  re- 
peat operations.  Durant  and  Dort  used  their  earnings  to 
finance  the  Durant-Dort  Carriage  Company,  which  swiftly 
advanced  to  a  position  of  acknowledged  leadership  in  the 
trade  with  an  annual  production  of  50,000  "Blue  Ribbon" 
vehicles,  high  earnings,  and  a  strong  cash  position,  which, 
as  we  shall  see,  has  its  bearing  on  the  story  of  the  Buick 
and  General  Motors.  His  success  in  the  carriage  business 
made  Mr.  Durant  a  millionaire  before  his  fortieth  year, 
placing  him  in  a  position  where  an  average  man  might  have 
been  satisfied  with  both  his  fortune  and  his  prestige.  But 
W.  C.  Durant  was  no  average  man;  when  the  carriage  busi- 
ness settled  down  into  stodgy  matter-of-f actness,  he  looked 
for  other  fields  to  conquer. 

Thus  far  his  natural  bent  toward  commercial  adventure 
had  found  expression  in  the  sharp  competitive  building  and 
selling  of  styled  carriages,  a  trade  wide  open  to  the  risks  of 
fashion.  If  the  popular  note  could  be  struck  with  a  buggy, 
if  its  lines  attracted  rural  swains  or  a  town's  social  leaders, 
the  manufacturer  drove  a  thriving  trade.  By  the  turn  of 
the  century  the  fun  was  out  of  the  carriage  business. 
Mr.  Durant  went  to  New  York  City  and  was  studying 
Wall  Street  and  the  Stock  Exchange  at  close  range  about 
the  time  that  Mr.  Whiting  was  beginning  to  think  that  the 
Buick  Motor  Company  needed  a  new  management. 

Mr.  Durant  came  back  to  Flint  the  next  summer  to  see 
just  what  there  was  to  this  Buick  car  which  the  Flint  Wagon 
Works  and  James  Whiting  had  brought  to  Flint.  With  no 
technical  experience  of  his  own  to  guide  him,  Mr.  Durant 
applied  the  only  test  he  could  make,  but  he  did  so  with  a 
thoroughness  which  to  this  day  is  recalled  in  Michigan.  He 
drove  that  two-cylinder  Buick  back  and  forth  over  a  wide 
range  of  territory  devoid  of  good  roads  save  for  a  few 
gravel  turnpikes  built  by  toll  companies.  He  put  it  through 
swamps,  mud  and  sand,  and  pitch-holes  for  almost  two 
months,  bringing  it  in  for  repairs  and  consultations  and  then 
taking  it  out  again  for  another  strenuous  cross-country  run. 

80  The  Turning  Wheel 

He  had  every  sort  of  mischance  chronic  in  the  motoring  of 
the  period,  often,  of  course,  being  stalled  in  out-of-the-way 
hamlets  for  lack  of  repair  parts  or  fuel  and  oil.  During 
these  enforced  waits,  perhaps  in  a  country  blacksmith  shop 
which  some  day  would  be  a  garage,  this  impetuous  and  eager 
mind  wrestled  with  the  future  of  transportation. 

The  central  idea  of  the  motor  car  must  have  appealed  to 
his  temperament,  for  it  emphasized  qualities  and  powers 
like  some  of  his  own:  speed,  novelty,  flexibility,  the  ability 
to  "get  there."  Its  possibilities  for  salesmanship  and  show- 
manship would  also  appeal  to  one  who  had  proved  himself 
already  a  most  successful  distributor  of  vehicles.  The  motor 
car,  he  could  see,  fitted  the  progressive  American  spirit  like 
a  glove.  In  addition,  here  was  a  piece  of  merchandise  that 
could  not  be  hid;  the  motor  car  would  advertise  itself  on 
the  street  and  at  the  curb.  Probably  Mr.  Durant  concluded 
early  in  these  tests  that  if  Buick  was  not  the  medium  by 
which  he  would  enter  the  automobile  trade,  he  would  get 
into  that  business  in  another  way  before  long.  But  after 
the  car  had  met  his  severe  tests,  Mr.  Durant  looked  no 
further :  Buick  would  do. 

By  November  i,  1904,  the  deal  between  Buick  Motor 
Company  and  W.  C.  Durant  was  complete;  on  that  day  the 
capital  was  increased  from  $75,000  to  $300,000,  repre- 
sented by  3,000  shares  of  $100  each.  Holders  of  the  old 
stock  agreed  to  accept  Preferred  stock  paying  7  percent 
with  a  25  percent  bonus  of  Common  stock.  The  contract 
covering  this  agreement  was  drawn  by  John  J.  Carton  of 
Flint,  for  many  years  attorney  for  the  Buick  Motor  Com- 
pany. The  Wagon  Works  stockholders  agreed  to  accept 
Preferred  stock  for  their  holdings.  It  was  agreed  that  later 
Buick  capitalization  should  be  increased  to  $500,000  and 
that  the  Wagon  Works'  interest  should  receive  $175,000. 
This  was  done.  On  September  u,  1905,  Buick's  stock  was 
increased  to  $1,500,000 — $900,000  Common  and  $600,000 
Preferred.  Mr.  Carton  relates  that  while  the  Buick  business 
was  sound  and  there  was  a  legitimate  need  for  this  large 
capitalization,  he  had  some  difficulty  finding  enough  assets 
to  justify  the  increase.  He  says: 

Buick  81 

In  the  application  presented  to  the  Secretary  of  State,  I  listed  all  the 
assets  quite  generously  up  to  the  legal  requirements,  but  neverthe- 
less we  were  still  $60,000  short,  and  this  was  taken  up  by  the  fol- 
lowing item: 

"Ownership  of  invention  of  combustion  engine  construction  not 
patented  for  business  reasons — $60,000." 

This  schedule  went  through,  but  later  attracted  little  attention 
so  that  at  the  next  meeting  of  the  state  legislature  a  law  was  passed 
prohibiting  the  listing  in  such  cases  of  any  items  intangible  and 
not  subject  to  execution.  However,  it  was  quite  important  that 
the  company  have  the  full  amount  of  the  stock  to  issue  at  that  time, 
as  Common  was  usually  given  as  a  25  percent  bonus  with  sales  of 
Preferred.  The  fact  that  I  was  very  well  acquainted  at  Lansing, 
the  state  capital,  may  have  been  beneficial  in  getting  such  a  hazy 
item  passed. 

Mr.  Durant  himself  sold  most  of  the  stock.  It  is  related 
that  at  the  outset  he  sold  $500,000  worth  in  a  single  day  to 
his  Flint  neighbors.  There  can  be  no  doubt  that  Mr.  Durant 
was  a  most  persuasive  salesman.  An  aura  of  success  hung 
around  him.  For  more  than  twenty  years  all  his  undertak- 
ings had  profited;  early  in  his  selling  campaign  he  had 
indisputable  proof  that  Buick  was  making  money.  Produc- 
tion was  steadily  increasing,  and  he  could  sell  every  car  he 
produced  for  cash,  F.O.B.  factory.  So  keen  was  the  demand 
that  his  problem  was  not  so  much  selling  cars  as  finding 
capital  with  which  to  erect  buildings,  install  machinery,  and 
create  a  distributing  organization  so  that  more  cars  could 
be  built  and  delivered.  However  loyally  Flint  might  buy 
stock,  it  was  too  small  a  city  to  finance  the  expanding  enter- 
prise; Mr.  Durant  had  to  go  out  into  the  highways  and 
byways  of  Michigan  for  capital.  In  this  search  he  was  tire- 
less. He  saw  an  immense  fortune,  tremendous  power,  and  a 
lofty  reputation  as  an  industrial  pioneer  almost  in  his  grasp 
if  he  could  only  find  the  necessary  capital. 

Of  course,  it  goes  without  saying  that,  in  representing 
the  golden  prospects  of  his  venture  to  investors,  faith  and 
sincerity  accounted  for  his  extraordinary  success  in  getting 
promotion  money  from  individuals.  He  would  have  been 
saved  a  tremendous  amount  of  time  and  energy  if  he  had 

82  The  Turning  Wheel 

been  able  to  secure  the  services  of  a  strong  investment 
banking  house  to  dispose  of  his  securities  systematically,  but 
this  was  out  of  the  question  in  that  time  and  locality.  Local 
bankers  helped  him  all  they  could,  and  his  persuasive  per- 
sonality drew  temporary  aid  from  larger  banks  outside  of 
Flint,  but  what  he  needed  was  a  large  fixed  capital  invested 
for  a  long  pull,  and  this  he  could  secure  only  through  fur- 
ther personal  effort. 

Meantime,  as  the  builder  and  leader  of  Buick,  he  found 
a  host  of  problems  other  than  financial  demanding  solu- 
tion. Since  it  was  early  apparent  that  Buick's  facilities  in 
the  western  end  of  Flint  would  be  inadequate,  offices  and 
assembly  operations  were  transferred  to  a  factory  in  Jack- 
son which  had  been  used  by  the  Imperial  Wheel  Company. 
Imperial  Wheel  was  part  of  the  Durant-Dort  family,  as 
were  the  Flint  Varnish  Works  and  the  Flint  Axle  Works. 
The  three  companies  had  already  been  located  in  the 
north  end  of  Flint,  where,  with  a  view  to  future  expan- 
sion of  these  and  other  companies,  Mr.  Durant  had  pur- 
chased the  22O-acre  Hamilton  farm  for  $22,000.  Thus  he 
had  in  hand  an  excellent  site  for  the  expansion  of  Buick  it- 
self with  adequate  trackage  on  the  Pere  Marquette  rail- 
road, and  good  location  as  respects  drainage,  water  supply, 
and  general  accessibility.  He  planned  to  sell  part  of  this 
area  as  building  lots,  laying  out  for  that  purpose  Oak  Park 
Subdivision.  But  of  course  an  immense  amount  of  organiz- 
ing work  had  to  be  done  on  the  tract  and  its  approaches,  as 
well  as  in  plant  construction,  before  Buicks  could  be  pro- 
duced there.  In  the  meantime  the  Jackson  plant  held  the 
fort  while  Buick  motors  continued  to  be  made  in  West  Flint. 
Jackson,  indeed,  might  have  continued  as  the  chief  seat 
of  Buick  if  capital  could  have  been  found  there  as  easily  as 
in  Flint. 

This  geographic  division  of  the  business  increased  the 
labors  of  the  leader.  We  can  picture  Mr.  Durant  at  this 
time  as  a  man  desperately  hurried,  spurred  by  ambition  and 
responsibility  to  feats  of  almost  superhuman  endurance, 
driving  at  breakneck  speed  over  wretched  roads  between 
his  two  plants,  holding  conferences,  making  quick  decisions, 
seeking  out  and  encouraging  new  dealers,  scouring  the 


Founder  of  General  Motors 

84  The  Turning  Wheel 

country  for  supplies  and  building  plants,  subduing  raw  land 
to  industrial  and  residential  uses  and  feverishly  seeking 
new  capital.  This  spare,  small  man  seemed  to  draw  upon 
irresistible  sources  of  energy.  He  worked  more  hours  than 
any  of  his  employees,  did  with  little  sleep,  yet  came  to  his 
labors  fresh  and  smiling  every  morning.  There  was  a  gaiety 
and  resilience  in  him  which  overcame  all  obstacles.  The 
press  began  to  speak  of  him  as  the  "Little  Giant."  His  wor- 
shipful associates  might  call  him  "Billy,"  but  among  them- 
selves they  fell  into  the  habit  of  calling  him  "the  Man." 
"The  Man  says,"  was  the  common  preface  as  they  passed 
his  orders  along  from  one  to  the  other.  Sometimes  "He 
says"  would  be  a  sufficient  indication  of  authority.  Both 
forms  were  proof  of  the  loyal  and  willing  acceptance  of 
that  authority.  He  was  the  first  among  equals  rather  than 
the  autocrat,  and  no  captain  has  ever  been  followed  by  more 
devoted  troops.  The  camp  followers,  the  local  public,  and 
the  business  men  alike  hung  on  his  words. 

One  factor  in  developing  this  amazing  and  truly  affec- 
tionate loyalty  was  his  lack  of  concern  for  individual  gain, 
the  natural  ease  and  buoyancy  with  which  he  played  the 
prince  in  distributing  bounties.  There  are  innumerable  evi- 
dences that  he  cared  little  for  money  for  its  own  sake.  His 
own  tastes  were  simple,  he  had  no  time  to  spend  money; 
already  well  off,  he  had  serene  confidence  that  he  would 
always  be  successful  and  that  nothing  could  stop  him  from 
amassing  an  immense  fortune  in  the  automobile  game.  I  use 
the  word  "game"  advisedly:  if  he  was  not  the  man  who 
invented  that  adventurous  expression  to  describe  the  early 
activities  of  what  has  since  become  a  most  precise  and 
responsible  business,  he  at  least  played  that  great  game 
most  completely  as  an  adventure  of  the  human  spirit. 

As  an  example  of  his  lavish  disregard  of  personal  gain 
and  his  willingness  to  share  profits  with  those  whose  back- 
ing had  braced  him  in  the  past,  Mr.  Durant  is  said  to  have 
turned  in  to  the  Durant-Dort  treasury  at  one  time  some 
$300,000  worth  of  Buick  stock,  voted  to  him  personally  in 
return  for  his  work  in  promoting  the  company.  In  com- 
pleting his  layout  for  the  approaches  to  the  Buick  indus- 
trial site,  he  paid  $4,000  for  land  offered  at  $1,800  simply 

Buick  85 

because  he  knew  that  this  land  as  part  of  his  grand  objective 
was  worth  that  much  and  more.  The  instances  of  his 
largesse  could  be  multiplied  indefinitely.  He  explained  his 
generosity  toward  Durant-Dort  stockholders  by  saying  that 
he  had  been  on  the  Durant-Dort  pay  roll  during  the  period 
in  which  he  was  organizing  Buick,  though  the  fact  is  that  he 
was  drawing  a  merely  nominal  sum  from  his  old  company. 
Of  course,  the  essential  fact  is  that  he  enjoyed  doing  these 
things,  and  the  power  to  do  them  was  his  compensation. 

With  a  swift  expansion  program  in  hand  and  no  banking 
connections  equal  to  the  situation,  there  were  times  when 
the  good-will  built  up  so  generously  brought  important  re- 
turns in  timely  assistance.  Mr.  F.  A.  Aldrich,  secretary  of 
the  Durant-Dort  Carriage  Company  for  many  years,  shows 
from  his  records  that  Durant-Dort  furnished  Buick  with 
capital  in  its  early  stages.  Mr.  Aldrich  says : 

Owing  to  a  decreased  trade  in  horse-drawn  vehicles  Durant-Dort 
Carriage  Company  needed  less  capital;  both  our  treasury  and 
credit  were  in  excellent  shape,  while  Buick  needed  assistance. 
Hence  in  the  spirit  of  "team-work"  proverbial  as  applied  to  Durant- 
Dort  and  under  full  recommendation  of  Mr.  Dort,  president, 
we  made  in  one  way  or  another  large  investments  in  Buick  stocks 
and  also  later  in  General  Motors  stock.  At  first  these  stocks  were 
held  in  our  treasury  but  later  on  legal  advice  they  were  placed  in 
my  name  as  trustee.  We  made  several  disbursements  of  this  stock 
to  Durant-Dort  stockholders  as  dividends. 

The  records  show  numerous  instances  of  our  helpfulness.  We  in- 
dorsed Buick  paper  in  Chicago  on  one  occasion,  and  the  loan  fall- 
ing due  at  an  unfortunate  time,  Durant-Dort  had  to  sell  Buick 
stock  at  distress  prices  to  pay  it  off.  On  June  4,  1906,  Durant- 
Dort  bought  $100,000  worth  of  Buick  stock.  There  was  a  close 
financial  relationship  between  the  two  companies  then,  and  it  con- 
tinued after  General  Motors  was  formed.  On  Feb.  20,  1909, 
while  General  Motors  was  still  in  its  infancy,  I  was  authorized  to 
buy  and  hold  10,000  shares  of  its  Preferred  and  Common  stock. 
Later,  when  Mr.  Durant  took  on  Chevrolet  as  an  independent 
venture,  the  Durant-Dort  treasury  furnished  him  funds.  In  fact, 
within  reason,  our  resources  were  always  at  his  disposal. 

The  Flint  Wagon  Works  also  helped  Buick  get  on  its 
feet.  Five  of  its  directors  loaned  the  Buick  Motor  Company 

86  The  Turning  Wheel 

at  one  time  $20,000  each  to  match  an  equal  sum  loaned  to 
Buick  at  the  same  time  by  the  Durant-Dort  Carriage  Com- 
pany. Thus  in  one  way  or  another,  with  occasional  rescue 
loans  and  a  vigorous  search  outside  of  Flint  for  capital, 
Buick  expansion  was  financed. 

Even  when  allowances  are  made  for  the  newness  of  the 
automobile  business  and  the  suspicion  in  which  it  was  held 
by  the  banking  world  in  general  in  those  early  days,  it  does 
not  appear  that  Mr.  Durant  ever  quite  deserved  the  repu- 
tation for  financial  genius  which  at  one  time  clung  to  his 
name.  Certainly,  in  the  formative  years,  finance  was  his 
weak  side.  While  he  could  make  money  in  his  operations, 
and  raise  a  good  deal  of  money  by  his  personal  force  and 
the  confidence  which  he  inspired,  he  never  seemed  able  to 
budget  his  operations  accurately  in  advance  and  build  up 
reserves.  His  vision  was  always  running  far  ahead  of  his 
treasury,  so  that  there  was  always  the  possibility  that  his 
affairs  would  approach  the  ragged  edge  of  necessity  if  a 
turn  came  with  an  unfavorable  market  for  his  goods,  or 
the  well-springs  of  capital  suddenly  ran  dry.  His  inven- 
tories and  commitments  were  usually  in  excess  of  his  present 
power  to  pay,  but  he  had  an  immense  faith  that  by  the 
time  he  had  to  pay  for  them  he  would  find  the  money 
somewhere.  Either  the  market  would  provide  it  or  stock 
would  be  sold;  in  a  pinch  he  could  go  to  friendly  corpora- 
tions or  individuals.  He  kept  the  golden  ball  in  the  air  by 
sheer  dexterity  and  courage  through  six  straining  years  of 
exceedingly  rapid  expansion.  Looking  backward  upon  the 
activities  of  a  quarter  of  a  century  ago  it  can  be  seen  that 
the  notable  human  qualities  behind  this  triumph  also  had 
their  defects,  which  eventually  caused  Mr.  Durant's  retire- 
ment from  the  vast  business  which  he  originated.  But  it 
can  also  be  appreciated  that  his  qualities  were  precisely 
those  needed  to  get  a  foundation  laid  with  whatever  tools 
and  materials  were  ready  at  hand.  Probably  no  other  man 
could  have  built  up  Buick  in  four  years  to  a  point  where,  as 
an  acknowledged  leader  in  the  industry,  Buick  became  the 
rock  on  which  General  Motors  was  founded. 

Courage  is  the  key-word  for  this  Buick  surge  to  market 
leadership.  Buick  dared  to  produce  in  large  quantities  when 

Buick  87 

most  of  its  competitors  were  proceeding  cautiously  on  re- 
stricted schedules.  It  pioneered  in  the  development  of 
attractive  retail  stores  in  large  centers,  and  drew  able, 
ambitious  men  into  both  wholesale  and  retail  selling.  There, 
perhaps,  was  Mr.  Durant's  greatest  contribution  to  the 
technique  of  automobile  administration. 

For  a  man  so  vastly  daring  it  was  inevitable  that  as  Buick 
production  rose,  further  expansion  should  seem  not  only 
desirable  but  indeed  necessary.  Vital  supplies  had  to  be 
safeguarded  both  as  to  volume  and  prompt  delivery.  Com- 
petition was  then  less  of  a  wrestle  for  markets  and  more 
of  a  race  against  time.  The  public  would  take  Buicks  as  fast 
as  they  could  be  turned  out;  delay  in  delivery  of  even  a 
minor  part  might  cost  a  tremendous  sum.  Even  to  this  day, 
no  automobile  manufacturer  controls  the  production  chain 
of  all  supplies  from  their  primary  forms  to  their  incor- 
poration in  a  completed  automobile  ready  for  the  road;  yet 
in  this  industry  utter  dependence  on  certain  forms  of  goods 
was  so  essential  that  practically  all  the  survivors  in  the 
stern  battle  for  existence  waged  during  the  past  thirty  years 
are  those  who  have  been  working  toward  self-determination, 
seeking  positions  where  their  operations  could  not  be  shut 
off  by  shrinkage  of  those  essential  supplies. 

For  instance,  consider  engines.  In  the  early  days  of  the 
industry  many  automobile  manufacturers  bought  all  or  part 
of  their  power  units.  While  these  units  may  have  been 
entirely  satisfactory  in  price  and  quality,  nevertheless,  the 
automobile  manufacturer  soon  realized  that  his  produc- 
tion schedule  was  at  the  mercy  of  circumstances  beyond  his 
control.  A  stoppage  in  his  supplier's  plant,  arising  from  any 
one  of  a  number  of  causes,  tied  up  his  own  plant.  This  risk 
being  too  heavy,  the  tendency  has  been  for  car  manufac- 
turers to  take  over  engine  manufacture.  Some  have  gone  a 
considerable  distance  toward  controlling  supplies  from  raw 
materials  to  the  finished  product,  yet  no  manufacturer  has 
been  able  as  yet  to  process  all  the  materials  used  in  auto- 
mobiles, because  of  the  wide  range  of  those  materials  and 
the  special  skill  and  large  capital  required  to  bring  them  into 
economic  use.  The  drift  has  been  toward  self-sufficiency,  yet 
complete  self-sufficiency  has  not  been  attained  and  probably 


The  Turning  Wheel 

never  will  be.  But  in  this  evolution  nearly  all  those  manu- 
facturers who  depended  altogether  on  assembling  the  prod- 
ucts of  other  enterprises  have  either  perished  or  have  been 
absorbed.  The  survivors  are  those  firms  which  accepted  the 
responsibility  of  making  for  themselves  goods  which  others 
would  have  been  glad  to  make  for  them,  but  which  for 
various  substantial  reasons  it  seemed  vital  to  control 
throughout  the  entire  process  of  production  and  assembly. 
Mr.  Durant  realized  the  value  of  broad  organization  be- 
fore he  entered  the  automobile  field.  The  Durant-Dort  Car- 

1904  Buick,  priced  at  $1,250,  top  and  lights,  $125  extra 

riage  Company  had  gone  further  than  any  of  its  competitors 
in  organizing  subsidiary,  or  at  least  dependent,  companies. 
It  had  fathered  companies  for  the  production  of  wheels, 
paint,  varnish,  and  axles;  through  others  it  owned  in  whole 
or  in  part  extensive  timber  holdings  in  distant  states.  It  was 
natural  that,  faced  with  the  market  possibilities  of  the 
automobile  and  the  difficulty  of  securing  supplies  of  the 
right  sort  as  required  in  his  hot  haste  for  action,  Mr.  Durant 
should  leap  to  the  conclusion  that  he  needed  bmader  organ- 
ization than  Buick,  big  enough  to  include  not  only  other 
motor-car  producers  but  also  makers  of  essential  parts. 

Buick  89 

The  need  to  control  supplies  was  keenly  felt  in  1907, 
when  Buick,  which  had  concentrated  successfully  on  two- 
cylinder  cars,  added  four-cylinder  models  to  the  line.  In 
1908  diversification  was  carried  even  further,  with  two  two- 
cylinder  models,  and  four  four-cylinder  models.  One  of  the 
latter — the  famous  Model  Ten — started  Buick  on  the 
heaviest  production  it  had  yet  known,  and  its  success  was  no 
doubt  one  of  the  elements  encouraging  W.  C.  Durant  to 
envision  a  General  Motors.  Frederic  L.  Smith's  remi- 
niscences— Motoring  Down  a  Quarter  of  a  Century — indi- 
cate that  his  first  talks  were  with  Mr.  Smith  at  Lansing, 
and  that  the  very  name,  General  Motors,  was  thus  early 

Flint  meantime  was  booming  as  Buick  drew  labor  from 
all  directions.  Responding  to  the  pull  of  high  wages,  men 
hurried  there  from  all  quarters  of  the  compass,  from  other 
industrial  cities,  from  the  farms  of  southern  Michigan  and 
the  forest  areas  further  north.  Tool  makers  came  from 
Providence  and  Hartford.  The  population  of  the  city 
doubled  in  five  years.  House-building  could  not  keep  pace 
with  the  flood  of  arrivals.  While  Buick  factory  No.  10,  then 
the  largest  industrial  building  in  the  world,  was  under  con- 
struction, the  neighborhood  resembled  a  mining  camp.  Liv- 
ing quarters  were  at  a  premium;  the  same  bed  would  be 
rented  to  a  night-worker  by  day  and  a  day-worker  by  night. 
Shacks,  hastily  thrown  together  to  provide  some  sort  of 
shelter,  housed  families  who  were  having  their  first  taste 
of  prosperity.  Farms  were  subdivided  right  and  left, 
townspeople  built  houses  as  fast  as  they  could,  spurred  by 
rising  values  as  well  as  by  public  spirit.  One  could  see  all 
the  evidences  of  rapid  municipal  growth,  the  difficulties  of 
absorbing  a  large,  new  population  swiftly  into  an  old  one. 
Persons  of  foreign  blood  congregated  in  colonies — Polish, 
Hungarian,  Serbian. 

What  one  could  not  see  as  readily,  unless  he  knew  the 
Buick  shops,  was  the  terrific  task  which  faced  the  Buick 
organization  in  molding  this  medley  of  raw  and  transient 
labor  into  an  efficient  working  force,  its  members  well  dis- 
posed toward  one  another  and  toward  management.  Flint 
was  an  open-shop  town,  and  that  tradition,  bolstered  by 

90  The  Turning  Wheel 

high  wages  and  the  opportunities  for  advancement  offered 
by  a  new  industry,  held  firm  against  the  few  and  withal 
rather  weak  efforts  to  unionize  the  plants.  A  dynamic  and 
dramatic  leadership  helped  to  maintain  that  tradition  until 
employee  morale  could  be  built  up  to  a  quite  remarkable 
peak,  until  men  began  to  see  that  Buick,  springing  from  the 
soil  of  the  Hamilton  farm,  would  be  an  enduring  institution 
in  whose  plants  they  could  find  steady  and  profitable  em- 
ployment during  normal  times  and  which  in  fact  proved  for 
years  more  resistant  to  business  depression  than  the  aver- 
age manufacturing  plant. 

Buick  in  1908  manufactured  8,487  cars,  occupied  the 
largest  automobile  plant  in  the  world,  and  had  a  net  worth 
of  $3,417,142.  It  had  never  missed  a  dividend  on  its  Pre- 
ferred stock. 

General  Motors,  immediately  after  its  organization  in 
September,  1908,  took  over  Buick  Motor  Company  for 
$1,500  cash,  Common  stock  of  $1,249,250,  and  Preferred 
stock  of  $2,499,500 — a  total  of  $3,750,250,  a  conserva- 
tive valuation  to  which  Buick  had  grown  from  $75,000 
within  the  remarkably  short  space  of  four  years. 

Although  its  manufacturing  processes  would  be  consid- 
ered haphazard  and  inefficient  in  the  light  of  modern  tech- 
nology, they  were  abreast  of  the  best  practice  of  the 
day.  Buick  possessed  a  spirit  in  its  personnel  and  a  reputa- 
tion with  the  public  which  made  it  a  tower  of  strength  from 
which  its  bold  organizer,  after  surveying  wider  fields,  could 
advance  toward  his  great  objective — the  formation  of  the 
General  Motors  Company. 

Chapter   VI 

ONTIAC,  another  great  seat  of  General  Motors  manufac- 
turing, began  its  industrial  development  as  Flint  did,  with 
the  building  of  horse-drawn  vehicles.  The  first  Pontiac  bug- 
gies and  wagons  were  built  by  a  blacksmith  named  King 
on  the  site  of  the  present  Fisher  plant  near  Bagley  Avenue. 
W.  F.  Stewart,  who  later  went  to  Flint  and  rose  to  emi- 
nence there  as  a  body-builder,  bought  King  out  and  started 
his  career  in  Pontiac,  later  selling  his  site  to  O.  J.  Beau- 
dette  who  sold  in  turn  to  Fisher  Brothers.  The  site  has  a 
continuous  history  of  vehicle  manufacture  for  more  than 
half  a  century. 

Another  Pontiac  pioneer  was  R.  D.  Scott,  a  Canadian 
from  Guelph,  Ontario,  who  established  himself  near  the 
Grand  Trunk  tracks.  W.  A.  Paterson,  pioneer  in  the 
vehicle  industry  of  Flint,  learned  his  trade  in  Scott's  shop 
in  Guelph,  followed  him  to  Pontiac  and  then  went  "up 
country"  to  Flint.  At  first  Scott's  trade  was  altogether  local, 
but  in  1889  or  thereabout,  he  began  to  branch  out  with 

Lee  Dunlap,  who  went  to  work  for  Scott  in  1889  and 
continued  to  be  a  factor  in  Pontiac  industry  well  into  the 
automobile  days,  explains  the  swing  from  small  production 
to  large  in  the  Michigan  carriage  field,  as  follows: 

Until  that  time,  carriages  and  wagons  had  been  manufactured  by 
hand,  a  few  at  a  time  and  a  few  in  a  place,  with  the  result  that 
the  costs  were  relatively  high.  In  various  parts  of  the  country,  it 

92  The  Turning  Wheel 


was  discovered  that  through  division  of  labor  and  quantity  pro- 
duction, costs  could  be  greatly  reduced,  with  the  result  that  within 
four  or  five  years  there  was  a  considerable  boom  in  the  trade  and 
an  almost  complete  stopping  of  custom  building  throughout  the 
country  districts.  An  incident  will  serve  to  illustrate  the  trend  to 
larger  marketing.  I  sold  to  Sears-Roebuck,  shortly  after  they 
organized  in  Minneapolis,  the  first  buggy  they  sold  by  direct  mail, 
and  within  a  few  years,  at  the  height  of  the  carriage  industry,  every 
mail  brought  large  orders  from  them. 

Under  the  encouragement  of  prosperity,  the  entire  industry  pro- 
ceeded to  overbuild.  By  the  early  years  of  the  twentieth  century, 
it  was  quite  apparent  that  the  buggy  business  had  seen  its  best 
days,  especially  as  far  as  Michigan  was  concerned.  When  automo- 
biles were  still  few  and  far  between  there  were  other  parts  of  the 
country  nearer  the  raw  materials,  which  seemed  to  hav^  an  ad- 
vantage over  the  Michigan  factories.  Practically  every  carriage 
manufacturer  began  to  look  around  for  some  new  development. 
The  nearest  one  at  hand  seemed  to  be  the  automobile. 

Of  course  you  and  I  know  that  there  is  no  striking  similarity  be- 
tween the  carriage  and  the  automobile  except  that  both  of  them 
travel  on  wheels.  We  had  worked  out  a  system  for  progressive 
assembly  and  a  quite  efficient  division  of  labor,  but  none  of  us 
knew  anything  about  machine  operations,  except  in  a  very  limited 
way.  We  seldom  used  blue  prints  and  close  measurements  were 
unnecessary.  Nevertheless,  the  automobile  industry  located  in  Pon- 
tiac,  entirely  because  Pontiac  had  been  a  city  which  manufactured 
horsedrawn  vehicles.  In  Jackson,  Flint,  and  many  other  cities  the 
same  tendency  was  in  evidence.  That  the  similarity  in  the  two  lines 
was  more  apparent  than  real  is  proved  by  the  fact  that  the  car- 
riage men  are  not  now  the  factors  in  the  automobile  trade  that 
they  were  in  the  beginning,  their  places  having  been  taken  by  men 
of  more  engineering  experience. 

The  largest  of  the  Pontiac  carriage  factories  was  the 
Pontiac  Buggy  Company,  which  Edward  M.  Murphy, 
S.  E.  Beach,  and  Francis  Emmendorf  had  incorporated  in 
November,  1893.  Although  incorporated  for  only  $25,000 
paid  in,  it  built  a  factory  then  reckoned  large  on  Oakland 
Avenue,  where  the  Pontiac,  Oxford  &  Northern  tracks 
crossed  that  thoroughfare,  on  land  now  occupied  by  the 
Pontiac  Motor  division. 

All  his  old  associates  ascribe  to  "Ed"  Murphy  extraor- 
dinary powers  of  organization  and  business  drive.  Born  in 

Oakland  and  Pontiac:  Old  and  New      93 

Wayne,  Michigan,  he  climbed  the  ladders  of  success  largely 
by  his  own  efforts  and  came  early  into  business  authority.  In 
1898,  after  the  Pontiac  Buggy  Company  had  enjoyed  its 
share  of  the  boom,  he  brought  Lee  Dunlap  into  his  orbit  by 
establishing  the  Dunlap  Vehicle  Company,  to  manufacture 
a  somewhat  lighter  grade  of  buggies  than  Pontiac  had  built. 
Mr.  Dunlap  came  over  from  the  C.  V.  Taylor  organization. 
Pontiac  Buggy  also  formed  the  Crescent  Carriage  Company 
in  1903.  In  1904  Mr.  Beach  sold  his  interest  to  Mr.  Murphy 
and  bought  the  latter's  interest  in  the  Crescent  and  Dunlap 
plants,  but  later  went  back  into  the  Pontiac  organization, 
remaining  until  the  change  from  carnage  to  automobile 
production.  When  this  change  came  Mr.  Murphy  was  sole 
owner  of  Pontiac  Buggy  Company,  but  his  associates  had 
interests  in  the  allied  carriage  plants. 

Not  only  was  the  carriage  trade  falling  but  also  pro- 
duction costs  were  rising,  owing  to  the  automobile  manu- 
facturers in  Flint  and  Detroit  drawing  Pontiac's  skilled 
workmen  away.  From  its  beginning  the  automobile  trade 
paid  practically  double  the  wage  rates  customary  in  car- 
riage production.  A  carriage  trimmer  might  get  two  dollars 
a  day,  an  automobile  trimmer  four  dollars  for  work  roughly 
similar.  Naturally,  the  automobile  business  drew  the  best 
workers,  and  the  new  wage  standards  dealt  the  declining 
carriage  trade  a  heavy  blow. 

Facing  decreased  production  and  increased  cost  for  car- 
riages, Mr.  Murphy  began  looking  around  for  an  auto- 
mobile to  manufacture,  or,  to  be  more  exact,  to  assemble 
from  purchased  parts.  He  had  heard  of  a  two-cylinder  car 
designed  for  Cadillac  in  which  the  latter  did  not  seem  to  be 
particularly  interested.  Tests  proving  satisfactory,  on 
August  28,  1907,  Mr.  Murphy  organized  the  Oakland 
Motor  Car  Company  for  $200,000;  20,000  shares  of  Com- 
mon stock,  par  $10.  New  money  was  furnished  by  James 
Dempsey  of  Manistee,  Michigan,  a  wealthy  retired  lumber- 
man. The  Murphy  carriage  plants  were  acquired  by  Oak- 
land at  various  times.  On  September  25,  1908,  the  capital 
stock  was  increased  to  $300,000  by  the  addition  of  $100,000 
in  Preferred  stock. 

94  The  Turning  Wheel 

The  two-cylinder  design  not  proving  highly  successful, 
the  company  brought  out  in  1908  Model  K,  a  four-cylinder 
car  powerful  for  its  time  and  underselling  all  competitors. 
It  became  a  hill-climbing  champion,  winning  the  Giants 
Despair  Climb  at  Wilkes-Barre  and  other  contests  at  Balti- 
more, Maryland;  Paris,  Illinois;  and  Jefferson  Hill,  Long 
Island,  New  York.  The  capital  outlay  being  larger  than 
anticipated,  the  close  of  1908  saw  the  new  venture  peril- 
ously close  to  disaster.  Mr.  Dunlap  speaks  of  Oakland  as 
"broke"  when  W.  C.  Durant  bought  it  early  in  1909  for 
his  new  General  Motors  Company,  but  perhaps  this  is 
merely  relative  to  commitments.  Another  source  says  that 
the  cash  position  of  Oakland  was  good,  capital  being 
doubled  in  a  year.  The  production  figures  are  278  cars  for 
1908,  1035  f°r  1909^ 

Mr.  Murphy  explained  to  his  group,  some  of  whom 
objected  to.  the  sale,  that  he  was  selling  obsolete  buildings. 
From  Mr.  Durant's  side,  one  of  the  advantages  was  Oak- 
land's organization.  Like  everyone  else  in  the  Michigan 
carriage  trade,  he  had  a  great  liking  for  "Ed"  Murphy  and 
probably  expected  that  Mr.  Murphy,  who  was  still  a  young 
man  of  great  vigor,  would  become  a  leader  in  the  new 
"automobile  game."  This  prospect  was  defeated  by  the 
latter's  early  death.  Other  members  of  the  Oakland  group 
were  men  who  have  since  become  important  figures. 

On  January  20,  1909,  General  Motors  directors  author- 
ized the  acquisition  of  a  half  interest  in  the  Oakland  Motor 
Car  Company.  By  February  23d,  Mr.  Durant  reported  the 
acquisition  of  15,000  Oakland  shares,  also  that  he  expected 
to  acquire  up  to  21,000  shares  at  $11  a  share.  Mr.  Murphy 
took  stock  and  notes  for  his  interest,  but  others  had  to  be 
paid  off  in  cash  and  by  June  5th  the  treasurer  reported  that 
he  had  paid  out  $200,856  in  cash  for  18,783  shares.  Hardly 
was  the  purchase  completed  than  Mr.  Murphy  passed  away 
and  Lee  Dunlap  became  general  manager.  Production 
advanced  to  4,000  cars  for  1910,  which  required  a  heavy 
plant  expansion  program,  not  without  its  bearing  on  the 
financial  difficulty  which  General  Motors  experienced  in 
the  latter  year. 

figures  furnished  by  National  Automobile  Chamber  of  Commerce. 

Oakland  and  Pontiac:  Old  and  New      95 

Mr.  Dunlap's  narrative  shows  the  speed  at  wltich  any- 
one who  followed  Mr.  Durant  in  those  days  was  forced  to 
travel : 

When  Mr.  Durant  visited  one  of  his  plants  it  was  like  the  visita- 
tion of  a  cyclone.  He  would  lead  his  staff  in,  take  off  his  coat,  be- 
gin issuing  orders,  dictating  letters,  and  calling  the  ends  of  the 
continent  on  the  telephone-,  talking  in  his  rapid  easy  way  to  New 
York,  Chicago,  San  Francisco.  That  sort  of  thing  was  less  com- 
mon than  it  is  now:  it  put  most  of  us  in  awe  of  him.  Only  the 
most  phenomenal  memory  could  keep  his  deals  straight ;  he  worked 
so  fast  that  the  records  were  always  behind. 

On  this  visit  of  which  I  am  thinking,  early  in  IQIO,  I  expected 
he  would  stay  several  days  as  we  were  to  discuss  the  whole  matter 
of  plant  expansion.  But  after  a  few  hours,  Mr.  Durant  said,  "Well, 
we're  off  to  Flint."  In  despair  I  led  him  on  a  quick  inspection  of 
the  plant.  Instantly  he  agreed  that  we  would  have  to  build,  and 
asked  me  to  bring  the  expansion  plan  with  me  to  Flint  the  next 
day.  There  wasn't  any  plan,  and  none  could  be  drawn  on  such 
short  notice,  but  his  will  being  law  and  our  need  great,  something 
had  to  be  done. 

So  I  called  in  a  couple  of  our  draftsmen  to  help  me  and  that  night 
we  made  a  toy  factory  layout — existing  buildings  in  one  color,  de- 
sired buildings  in  another.  We  drew  a  map  of  the  whole  property, 
showing  streets  and  railway  sidings,  and  then  glued  the  existing 
buildings  to  it  in  their  exact  locations.  Feeling  like  a  small  boy 
with  a  new  toy,  I  took  this  lay-out  to  Flint  and  rather  fearfully 
placed  it  before  the  chief.  I  needn't  have  been  alarmed  at  our  ama- 
teur lay-out.  He  was  pleased  pink.  We  had  a  grand  time  fitting 
our  new  buildings  into  the  picture  as  it  was  spread  on  his  desk. 
We  placed  those  new  buildings  first  here,  then  there,  debating 
the  situation.  When  we  agreed  as  to  where  they  should  go,  he  said, 
"Glue  them  down  and  call  W.  E.  Wood." 

Mr.  Wood  came  in  after  a  few  minutes  and  received  an  order 
for  their  construction.  In  the  whole  history  of  America,  up  to  that 
time,  buildings  had  never  arisen  as  swiftly  as  those  did.  Con- 
tractor Wood  had  men,  materials,  and  machines  moving  toward 
Pontiac  within  twenty-four  hours,  and  we  were  installing  ma- 
chinery in  part  of  the  structures  within  three  weeks.  But,  of  course, 
we  could  not  be  equally  swift  in  paying  for  them.  That  was  some- 
thing else.  But  for  the  time  being  none  of  us  worried  too  much 
over  that;  we  figured  the  "Little  Fellow"  would  find  the  money 
somewhere.  Which  he  did,  in  the  end,  though  we  know  there  was 
plenty  of  trouble  before  the  bills  were  receipted. 

96  The  Turning  Wheel 

These  early  years  in  the  automobile  business  were  marked  by  tre- 
mendous personal  activity  and  a  very  grave  shortage  of  capital. 
Anyone  going  direct  from  the  carriage  manufacture  to  automo- 
bile manufacture  could  have  little  conception  of  the  large  use  of 
capital  required  in  the  new  field  ...  I  was  with  Oakland  all 
through  the  1910  "pinch"  when  the  plant  was  frequently  visited 
by  members  of  the  Creditors*  Committee. 

Mr.  Dunlap  was  succeeded  as  general  manager  of  Oak- 
land by  George  E.  Daniels,  one  of  the  earliest  associates  of 
W.  C.  Durant  in  the  automobile  business  and  the  first 
president  of  the  General  Motors  Company  of  New  Jer- 
sey, holding  office  for  a  short  time  directly  after  incorpora- 
tion. After  resigning  the  presidency,  which  he  occupied 
merely  as  an.  interim  officer,  Mr.  Daniels  remained  with 
General  Motors  having  charge  of  Cartercar.  The  bankers' 
reorganization  placed  him  at  the  head  of  Oakland  where 
he  remained  until  1914. 

Production  rose  in  1913  to  a  new  peak  of  8,618  because 
of  two  advanced  models — a  fast,  light  "four"  with  an 
electric  self-starter,  and  a  "six" — Oakland's  first — priced  at 
$2,450,  a  moderate  figure. 

As  part  of  the  change  wrought  by  W.  C.  Durant's  return 
to  power  in  1916,  Mr.  Fred  W.  Warner,  who  had  succeeded 
Mr.  Daniels  as  general  manager,  became  a  vice-president  of 
General  Motors.  Under  him  price  reductions  and  improve- 
ments in  design  brought  Oakland  into  a  swift  run  of  pros- 
perity as  reflected  by  these  unit  sales  figures : 

1916 — 27,000  cars.  The  v-8  introduced 

1917 — 35,000  cars.  The  "light  six"  sold  at  $795 

1918 — 30,000  "light  sixes."  First  offering  of  closed  cars 

1919 — 52,000  "light  sixes"  sold  on  a  rising  market 

Automobile  prices  reached  a  peak  in  1920,  owing  to 
scarcity  of  materials  caused  by  war.  Pioneering  in  the  light 
car  field  with  closed  bodies,  was  so  much  of  a  marketing 
experiment  for  Oakland  that  dealers  were  required  to  take 
one  closed  car  with  each  carload  shipped  from  the  factory. 
Now  the  closed  car  is  standard  and  the  open  car  the  excep- 

Oakland  and  Pontiac:  Old  and  New      97 

The  post-war  boom  brought  prosperity  to  Oakland,  as  it 
did  to  other  manufacturers.  In  General  Motors  at  that  time 
lack  of  central  coordination,  allowing  great  latitude  in  in- 
ventories and  production  programs,  created  difficulties 
which  as  they  multiplied  brought  the  second  Durant  admin- 
istration of  General  Motors  to  an  end  and  a  change  of 
management  to  Oakland. 

After  Mr.  Warner  resigned  in  1920,  George  H.  Hannum 
served  as  president  and  general  manager  for  six  years,  to  be 
succeeded  by  Alfred  R.  Glancy  who  continued  in  the  saddle 
until  1931.  These  were  years  of  remarkable  expansion  in 
the  Pontiac  area,  the  General  Motors  plants  spreading 
northward  along  the  railway  and  an  entire  new  factory  lay- 
out being  built  beyond  Harris  Lake  in  what  had  been  open 
country  a  few  years  before.  During  the  1920—1930  decade 
Pontiac  grew  faster  than  any  other  industrial  city  in  its 
census  classification.  The  acute  shortage  of  houses,  from 
1919  on,  led  the  Corporation  into  an  extensive  housing  de- 
velopment through  the  Modern  Housing  Corporation. 

The  Oakland  line,  after  a  highly  successful  record  with 
"fours,"  entered  the  usix"  field  in  1915,  the  "eight"  field  in 
1916,  and  remained  a  leader  in  quantity  production  down  to 
1931,  when  it  was  discontinued.  The  Pontiac  car,  introduced 
as  a  light,  low-priced  "six"  in  1926,  received  such  a  warm 
market  welcome  in  the  next  few  years  that  under  the  man- 
agement of  I.  J.  Reuter,  who  took  hold  in  1931,  the  huge 
Oakland  plant  was  concentrated  on  Pontiac  production. 
Pontiac  appeared  in  1932  with  an  eight-cylinder  motor. 
Its  manufacturing  operations  were  under  the  direction  of 
W.  S.  Knudsen,  president  of  Chevrolet,  from  May,  1932,  to 
October,  1933.  Mr.  Knudsen  at  that  time  became  executive 
vice-president  of  General  Motors  in  charge  of  car  and  body 
manufacturing  in  the  United  States  and  Canada.  H.  J. 
Klinger,  vice-president  and  general  sales  manager  of  Chev- 
rolet, was  then  advanced  to  general  manager  of  Pontiac. 

Among  the  innovations  which  Oakland-Pontiac  takes 
pride  in  originating  or  early  adopting  are  oil  and  fuel  filters, 
air  cleaner,  crankcase  ventilation,  automatic  spark  control, 
interchangeable  bronze-backed  main  bearings,  harmonic 

98  The  Turning  Wheel 

balancer,  oil-tight  universal  joints,  honed  cylinders,  full 
pressure  lubrication,  and  rubber  spring  shackle  bushings. 
Oakland  was  the  first  division  to  bring  Duco-finished  cars 
to  quantity  production;  the  year,  1924. 

The  Pontiac  Motor  division,  in  succession  to  Oakland, 
now  occupies  231  acres  within  the  corporate  limits.  The 
experimental  unit  fronts  on  Oakland  Avenue.  The  main 
division,  to  the  north  just  inside  the  city  limits,  is  one  of 
the  most  advanced  industrial  lay-outs  in  the  world,  and 
entirely  new  since  1927.  This  huge  grouping  is  in  startling 
contrast  to  the  modest  factory  building  in  which  Oakland 
started  to  manufacture  motor  cars  in  1908,  when  only 
50,000  square  feet  of  space  housed  its  initial  activities. 

A  breezy  description  of  how  some  of  the  burning  ques- 
tions connected  with  new  car  models  are  threshed  out  and 
what  a  new  model — in  this  case  the  Pontiac  for  1932 — in- 
volves financially  is  given  in  Fortune  for  December,  1931. 
Perhaps  the  account  is  sufficiently  accurate  to  give  one  a 
general  impression  of  what  is  involved  in  a  change  of 

The  scene  is  a  luncheon  club  in  the  Fisher  Building,  De- 
troit, where  half  a  hundred  General  Motors  executives  are 
reported  as  present.  The  reader  is  supposed  to  be  accom- 
panying Mr.  Richard  H.  Grant : 

Mr.  Grant's  sales  problem  will  begin  with  the  oldest  thing  in  auto- 
mobile salesmanship:  namely,  the  automobile.  Should  the  1932 
Pontiac  have  free-wheeling?  Ride  control?  Should  the  foot  throt- 
tle be  changed  at  the  cost  of  35  cents  per  car  ($35,000  added  to 
production  costs)  ?  The  Pontiac  engineers  have  been  maintaining 
forty  experimental  cars  on  the  road  to  prove  these  things,  some  of 
them  embodying  features  that  will  not  appear  until  1933  or  1934. 
In  the  end,  during  the  coming  ten  months,  Mr.  Reuter  will  have 
spent  $1,000,000  for  research  on  the  1932  car,  to  which  should  be 
added  Pontiac's  share  of  the  research  done  by  General  Motors 
Research  Laboratories,  by  Fisher  Body,  by  Delco-Remy  (ignition) 
by  Harrison  Radiator,  by  New  Departure  (ball  bearings),  by  AC 
(spark  plugs,  gauges,  etc.)  by  Kelsey-Hayes  Wheel,  and  by  head- 
light, shock-absorber,  tool,  and  die  manufacturers  throughout  the 
land :  a  total  research  bill  of  $2,000,000  spent  by  the  industry  for 
this  car  alone.  After  the  tireless  engineers  have  estimated  the  cost 

Oakland  and  Pontiac:  Old  and  New      99 

of  every  one  of  the  15,000  Pontiac  parts,  and  after  theyliave  sub- 
mitted blue  prints  to  George  Christopher,  in  charge  of  Pontiac 
manufacture,  Mr.  Reuter  will  find  it  necessary  to  spend  $1,400,000 
in  retooling  for  this  model,  and  the  retooling  of  Fisher  Body  will 
cost  that  unit  $1,000,000  more.  New  machinery  will  cost  Pontiac 
$300,000  and  to  revamp  the  floor  plan  will  add  $150,000. 

All  through  General  Motors  history,  groups  of  vigorous 
men  have  been  making  similar  decisions  of  great  import 
which  affect  the  Corporation,  its  products,  and  the  world. 
Change  the  names  to  those  of  other  cars  and  persons,  place 
them  in  other  scenes,  and  you  have  a  fair  idea  of  the  group 
planning  which  has  been  going  on  in  General  Motors  for 
twenty-five  years.  All  over  the  broad  geographic  range  of 
the  Corporation,  both  in  the  United  States  and  abroad, 
plants  have  been  growing,  as  the  Pontiac  plant  grew,  be- 
cause men  who  knew  what  they  wanted  could  agree  on 
programs  and  carry  them  through. 

Chapter   VII 

.HE  two  most  vital  trends  in  American  machine  indus- 
try— Middle  West  daring  and  New  England  craftsman- 
ship— met  in  the  founding  of  Cadillac,  an  enterprise  whose 
success  has  had  a  profound  effect  on  the  whole  automobile 
trade  and  through  it  upon  American  industrial  history.  The 
first  of  these  influences  has  been  discussed  in  the  chapters  on 
Oldsmobile  and  Buick;  the  second  entered  the  scene  with 
Cadillac,  whose  roots  reach  back  into  the  New  England 
scene  of  traditionally  competent  workmanship  and  native 
mechanical  ingenuity. 

New  England's  early  eminence  in  American  industry  pro- 
duced an  imposing  array  of  inventors  and  an  army  of  able 
mechanics.  Indeed,  until  almost  the  turn  of  the  present  cen- 
tury, New  England  dominated  the  American  machine  in- 
dustry, and  for  a  time  it  seemed  likely  to  capture  first  place 
in  the  rising  automobile  trade.  The  state  of  Massachusetts 
recognized  the  importance  of  Blanchard's  steam  carriage, 
built  in  1825,  by  legislative  enactment  giving  that  vehicle 
the  right  to  use  the  roads.  The  first  gasoline  "horseless 
buggy"  of  the  modern  era  was  also  built  in  Springfield  by 
the  Duryeas.  The  Pope  interests  in  Hartford  came  early  to 
the  support  of  the  automobile,  and  both  as  manufacturers 
of  vehicles  and  part  owners  of  the  Selden  patent,  wielded 
great  influence  through  the  infant  years  of  the  industry. 

With  this  early  start,  the  wonder  is  that  the  automobile 
business  slipped  away  from  New  England  to  the  Middle 




West.  There  were  several  reasons  for  this  shift,  and  one 
is  this:  New  England  inventors  and  mechanics  went  West 
themselves.  New  England  was  always  a  seed-bed  of  talent 
in  the  industrial  arts;  as  the  young  men  of  New  England 
marched  West  they  took  its  best  traditions  with  them. 


The  career  of  Henry  Martyn  Leland,  founder  of  the 
Cadillac  Motor  Car  Company,  is  an  outstanding  example  of 
the  influence  of  New  England  machine  shop  practice  upon 
the  Middle  West.  Mr.  Leland  was  born  at  Danville,  Ver- 
mont, February  16,  1843.  He  was  early  apprenticed  in  the 
Crompton-Knowles  Works  at  Worcester,  Massachusetts. 
As  a  skilled  mechanic  he  was  taken  into  the  Federal 
Arsenal,  at  Springfield,  Massachusetts,  and  later  worked  in 
the  Colt  revolver  factory.  The  New  England  arms  factories 
were  the  first  to  apply  fully  the  practice  of  assembling  inter- 
changeable parts,  the  great  Eli  Whitney  establishing  this 
principle.  By  the  time  of  the  Civil  War  the  machining  and 
assembly  of  arms  parts  had  been  highly  refined,  with  the 
result  that  Leland  early  became  accustomed  to  a  high  de- 
gree of  precision,  laying  the  foundation  for  an  ideal  of 

102  The  Turning  Wheel 

accurate  machine  work  which  later  distinguished  the  out- 
put of  his  Detroit  factories. 

After  a  stay  of  twenty  years  with  the  famous  Brown  & 
Sharpe  Manufacturing  Company  at  Providence,  Rhode 
Island,  Mr.  Leland  went  "on  the  road"  in  the  Middle  West 
where  the  company  desired  to  introduce  their  machine  tools 
to  the  growing  mechanical  industries  of  that  section.  It  was 
in  this  way  that  he  became  acquainted  with  Detroit,  its 
industrial  leaders  and  possibilities. 

Moving  to  Detroit  in  1890,  he  established  the  Leland, 
Faulconer  &  Norton  Company  which  made  machine  tools, 
grinders,  gear  cutters,  etc.,  and  also  did  custom  work 
along  those  lines.  In  1895  the  firm  became  the  Leland  & 
Faulconer  Manufacturing  Company,  with  Charles  A. 
Strelinger  as  secretary.  Mr.  Strelinger  was  a  leading  hard- 
ware merchant  whose  immense  trade  in  bicycles  led  him  to 
take  a  keen  interest  in  every  type  of  rapid  transport.  The 
year  1896  is  notable  in  Leland  annals  for  the  establishment 
of  a  grey  iron  foundry  which  scored  a  remarkable  success 
by  introducing  more  closely  machined  castings  than  could  be 
had  at  that  time  elsewhere,  so  that  its  products  commanded 
premium  prices,  sometimes  as  much  as  thrice  the  usual  price. 

In  its  plant  on  Trombly  Avenue  the  company  added 
gears  for  chainless  bicycles  to  its  other  lines,  working  out  a 
process  for  grinding  these  case-hardened  gears  to  closer 
standards.  Another  activity  embraced  the  manufacture  of 
gasoline  motors  of  five,  ten,  and  fifteen  horsepower  for 
marine  uses,  a  line  of  production  which  inevitably  brought 
the  company  into  the  newly  developing  automobile  business. 
His  experience  with  marine  motors  began  in  the  East,  and 
all  through  his  early  days  in  Detroit  Mr.  Leland  was  an  en- 
thusiastic prophet  of  the  almost  unlimited  future  of  internal 
combustion  engines. 

Although  it  had  made  machinery  and  parts  for  other 
automobile  companies  earlier,  Leland  &  Faulconer  did  not 
enter  quantity  production  of  automotive  material  until 
it  began  manufacturing  transmission  gears  for  the  one- 
cylinder  motor  car  designed  by  R.  E.  Olds — the  famous 
curved-dash  runabout.  After  the  Oldsmobile  factory  had 
been  destroyed  by  fire,  need  to  restore  production  quickly 

Cadillac  103 

led  Mr.  Olds  to  turn  over  to  Leland  &  Faulconer  part  of 
his  motor  manufacture.  This  was  seized  upon  as  an  oppor- 
tunity to  show  the  world  to  what  close  standards  a  gasoline 
engine  could  be  built.  An  associate  of  Henry  M.  Leland 
says  in  this  connection: 

At  the  first  automobile  show  in  Detroit,  the  Olds  display  contained 
two  cars,  one  powered  by  Olds,  the  other  by  Leland.  I  recall  that 
Henry  Ford  pointed  out  to  us  as  a  curiosity  the  fact  that  the 
Leland  motor  was  operating  under  brakes  in  order  to  bring  it  to 
the  same  pace  as  the  Olds  motor.  Our  motor  developed  3.7  horse- 
power as  against  3  for  the  Olds-built  motor.  This  superiority  was 
due  entirely  to  closer  machining.  H.  M.  Leland  went  seriously  to 
work  on  the  Olds  motor  and  by  introducing  larger  valves  and 
improved  timing  system  we  were  able  to  build  this  one  cylinder 
up  from  3.7  horsepower  to  10.25.  On  taking  the  improved  article 
to  the  Olds  Company,  we  were  dismayed  by  the  refusal  to  use  it. 
Mr.  Olds  was  getting  all  the  business  he  could  handle  and  I  sup- 
pose such  a  radical  change  in  power  plant  would  have  necessitated 
alterations  in  many  directions.  The  point  is  significant  however  as 
a  key  to  a  future  of  accuracy  methods  in  manufacturing. 

While  Olds  was  rushing  rapidly  into  quantity  production 
and  Leland  &  Faulconer  were  gaining  their  reputation  for 
precision,  a  third  group  of  Detroit  men,  with  ample  capital 
at  their  disposal,  formed  the  Detroit  Automobile  Company 
in  1899,  in  an  endeavor  to  pioneer  a  merchantable  pas- 
senger car.  These  men  were  William  H.  Murphy,  Lem 
W.  Bowen,  Clarence  A.  Black,  and  A.  F.  White,  all  citi- 
zens of  the  first  rank,  who  had  as  their  chief  guide  and 
mainstay  in  the  mechanical  department  no  less  a  person 
than  Henry  Ford.  Mr.  Ford's  ideas  then  ran  more  to  speed 
than  to  comfort,  and  after  he  had  produced  two  racing  cars 
which  made  quite  exceptional  records  but  were  not  at  all 
what  his  backers  visualized  as  meeting  the  market  demand, 
the  Detroit  Automobile  Company  group  came  to  Leland  & 
Faulconer  and  agreed  to  use  the  latter's  improved  motor 
which  the  Oldsmobile  organization  had  not  seen  fit  to 
adopt.  With  their  assistance  the  Cadillac  Automobile  Com- 
pany was  organized  on  August  22,  1902,  with  a  capital  of 
$300,000.  Thus  Cadillac  became  established  at  Cass  & 


The  Turning  Wheel 

Amsterdam  avenues,  Detroit,  a  site  it  continued  to  occupy 
for  many  years. 

The  selection  of  that  name  was  a  logical  one  for  men 
versed  in  Detroit  history.  Antoine  Sieur  de  la  Mothe  de 
Cadillac  was  the  leader  of  the  French  expedition  which 
made  its  first  settlement  at  Detroit  in  1702,  just  two 

Cadillac  "one-lunger"  1902 
From  Duncan  s  World  on  Wheels 

hundred  years  before  the  founding  of  the  new  automobile 
company.  In  his  high  courage,  enterprise,  and  ability  the 
founders  saw  the  very  qualities  which  they  hoped  to  bring 
to  their  fledgling  corporation.  His  coat-of-arms  became  the 
emblem  of  the  new  company. 

Work  on  the  first  Cadillac  automobile  had  been  begun  in 
September,  1902 — a  one-cylinder  car  known  as  Model  A, 
of  which  two  units  were  completed  in  March,  1903.  In  the 
following  twelve  months  Cadillac  built  and  shipped  1,895 
finished  automobiles.  From  the  completion  of  that  first  car 
the  future  of  Cadillac  has  never  been  in  doubt. 

Cadillac  105 

This  famous  "one-lunger"  was  then  the  last  word  in 
superior  workmanship.  The  engine  was  located  under  the 
front  seat;  a  hand  crank  at  the  side  served  as  a  starter.  The 
driver  sat  to  the  right;  a  real  steering  wheel  offered  an 
advanced  feature,  nearly  all  the  other  cars  of  the  day 
steering  by  tiller  control.  The  car  had  no  running  board,  but 
patent-leather  fenders  imparted  an  air  of  distinction.  Four 
passengers  might  ride,  two  in  front  and  two  in  the  rear. 
Heavy  brass  kerosene  lamps  and  a  hand-operated  bulb 
horn  cost  extra. 

A  situation  then  arose  which  was  not  uncommon  in  those 
days.  While  Leland  motors  were  giving  excellent  satisfac- 
tion, the  Cadillac  Automobile  Company  was  unable  to  do 
equally  well  as  regards  chassis  and  body  manufacture.  It 
brought  its  troubles  to  the  Leland  organization.  As  the  lat- 
ter could  not  afford  to  see  art  outlet  for  their  motors  closed, 
they  accepted,  with  a  good  deal  of  misgiving,  the  proposition 
to  undertake  the  general  management  of  Cadillac.  The 
consolidation  of  Cadillac  Automobile  Company  and 
Leland  &  Faulconer  Manufacturing  Company  into  the  Cad- 
illac Motor  Car  Company  was  completed  on  December  27, 
1904.  Henry  M.  Leland  became  general  manager. 

In  1904  the  company  introduced  the  Model  B  one- 
cylinder  Cadillac.  In  all,  16,126  one-cylinder  Cadillacs  were 
manufactured  on  the  two  models.  The  one-cylinder  cars 
formed  the  bulk  of  early  output  demand  continuing  after 
the  "30"  of  four  cylinders  was  introduced  in  1905.  A  spec- 
tacular proof  of  the  long  life  of  these  one-cylinder  cars  was 
given  in  1922  when  on  the  twentieth  anniversary  of  the 
company,  Lucien  R.  Burns,  who  had  been  with  Cadillac 
since  its  organization,  drove  one  of  the  first  cars  it  had  ever 
built  from  Detroit  to  New  York  where  he  had  long  before 
unloaded  the  first  Cadillac  shipped  into  the  city.  More  than 
67,000  of  the  "305"  were  manufactured.  Both  the  one- 
cylinder  and  the  "30"  had  the  notable  feature  of  inter- 
changeability  of  parts. 

The  proudest  achievement  of  early  Cadillac  history,  the 
winning  of  the  Dewar  trophy,  awarded  by  the  Royal  Auto- 
mobile Club  of  London,  England,  for  the  greatest  advance 
by  any  motorcar  during  the  year,  flowed  directly  from  this 


The  Turning  Wheel 

achievement  of  parts  interchangeability.  Until  the  London 
demonstration,  the  world  believed  that  English,  French, 
and  German  workmanship  stood  superior  to  American  and 
that  the  rise  of  the  automobile  industry  in  this  country  re- 
ceived its  impetus  from  other  factors  than  those  involved 
design  and  manufacture — such  factors  as  the  vast 


Cadillac  cars  drawn  up  in  London,  1907,  for  tests  which  won  the 
1908  award  of  the  Dewar  Trophy 

distances  of  America,  its  large  population  and  the  broad  dis- 
tribution of  wealth.  Cadillac,  practising  the  highest  stand- 
ards of  close  workmanship,  now  revealed  that  automobiles 
could  be  made  of  interchangeable  parts  just  as  effectively  as 
firearms  could  be. 

A  graphic  picture  of  that  triumph  and  explanation  of 
what  it  meant  to  the  reputation  of  American  cars  abroad  is 
contained  in  a  letter  in  the  Automobile  Trade  Journal  of 
December,  1924,  from  F.  S.  Bennett  of  F.  S.  Bennett,  Ltd., 
24  Orchard  Street,  London,  W.  I.,  the  pioneer  agent  of 
Cadillac  in  the  British  Isles.  A  half-page  Cadillac  adver- 
tisement in  that  trade  organ  in  1903  led  Mr.  Bennett  into 
correspondence  with  the  company,  which  resulted  in  the 
setting  up  of  an  agency.  He  writes : 

I  would  not  like  to  say  just  how  many  million  dollars  have  changed 
hands  as  the  direct  result  of  this  advertisement,  and  it  goes  much 

Cadillac  107 

&.~  .4 

further  than  this,  as  it  can  be  rightly  claimed  to  have  been  the 
birth  of  the  industry  of  American  cars  in  Europe. 

The  early  history  of  American  cars  over  here  might  be  said  to  be 
the  early  history  of  the  Cadillac  car.  In  the  very  early  days  a  few 
American  cars  came  over  here  but  did  not  make  good.  The  Cadil- 
lac was  the  first  to  establish  itself  and  in  doing  so  established  the 
American-made  automobile  in  this  market.  For  several  years  I 
plowed  a  lonely  furrow,  being  the  only  man  who  did  not  falter 
in  his  belief  in  the  American  car. 

It  was  not  until  what  is  now  known  as  "the  famous  Cadillac 
standardization  test"  that  the  prejudice,  still  surviving,  of  dumped 
American  bicycles  and  a  certain  number  of  poorly  made  cars,  was 
successfully  overcome. 

This  test  in  1906  consisted  of  three  Cadillac  cars  being  assembled 
in  an  open  shed  at  Brooklands  track  from  a  medley  of  parts  rep- 
resenting the  dismembered  components  of  three  Cadillacs  taken 
from  the  dockside  by  the  Royal  Automobile  Club  officials  as  they 
arrived  from  America  and  taken  to  pieces  by  them  and  jumbled 
in  the  shed  mentioned. 

Then  the  Cadillac  mechanics  assembled  the  cars  from  the  heap 
with  no  other  tools  than  wrench,  hammer,  screw  driver  and  ply- 
ers.  The  three  cars  were  immediately  put  into  the  hands  of  the 
Royal  Automobile  Club  official  observers  and  went  through  a 
5OO-mile  test  on  the  Brooklands  track,  finishing  with  a  perfect 

That  was  the  first  demonstration  here  in  the  art  of  motor  car 
standardization  and  it  created  a  profound  impression.  For  this, 
the  Sir  Thomas  Dewar  trophy — awarded  for  the  most  meritorious 
performance  of  the  year — was  awarded  by  the  Royal  Automobile 
Club  to  Cadillac.  The  Cadillac  is  the  only  automobile  company 
that  has  won  this  trophy  twice. 

The  effect  of  this  test  on  the  public  mind  makes  it  stand  out  as 
historic  and  unique,  and  even  this  morning,  as  I  write  this,  I  re- 
ceived a  press  clipping  with  reference  to  this  test  carried  out 
eighteen  years  ago.  I  can  truthfully  say  that  during  the  eighteen 
years,  no  week  has  passed  in  which  a  clipping  from  some  news- 
paper in  some  part  of  the  world  has  not  arrived  referring  to  this 

It  had  the  effect  of  giving  the  Cadillac  car  in  particular,  and  the 
American-made  car  in  general,  a  place  in  the  sun  in  this  country. 
On  this  side  of  the  water  it  answered  completely  the  adverse 
criticisms  against  the  American-made  car  and  opened  wide  the 
gate  for  many  American  manufacturers  to  come  into  this  market. 


The  Turning  Wheel 

The  result  proved  a  triumph  for  Cadillac  methods,  also 
a  revelation  of  the  truth  that  quantity  production  and 
quality  production  by  no  means  need  be  antagonistic.  The 
lesson  was  plain  enough :  high  standards  of  accuracy  could 
be  secured  in  a  large  factory  geared  to  high  production  as 
well  as  in  a  small  shop  where  each  part  received  individual 

Cadillac  won  the  Dewar  trophy  a  second  time  in  1913  as 
a  result  of  its  pioneering  in  electrical  starting,  lighting, 
and  ignition,  being  the  first  car  so  equipped.  Mr.  Leland's 
keenness  to  relieve  the  need  for  cranking  spurred  C.  F. 
Kettering  of  Dayton  Engineering  Laboratories  to  his  no- 
table experiments  and  eventful  triumph  in  this  revolution- 
ary creation. 

The  Dewar  Trophy ,  twice  awarded  to  Cadillac,  1908  and  1913 

By  1908,  when  General  Motors  was  formed,  Cadillac 
had  secured  a  position  of  unquestioned  eminence  in  the 
automobile  world.  Its  one-cylinder  car  had  been  a  tremen- 
dous success,  and  the  four-cylinder  "30"  had  reached  an 
annual  production  of  between  7,000  and  8,000  with  the 

Cadillac  109 

price  at  $1,400.  The  company  was  well  managed,  highly 
prosperous,  and  financially  conservative.  Although  capital- 
ized for  $1,500,000,  this  represented  largely  the  plowing 
back  of  profits.  It  has  been  said  that  only  $327,000  in  cash 
went  into  the  enterprise  from  all  sources.  Already  Cadillac 
had  achieved  an  outstanding  reputation  in  the  fine  car  field, 
and  it  was  this  reputation  which  led  Mr.  W.  C.  Durant  to 
attempt  adding  Cadillac  to  his  newly  formed  General 
Motors  Company. 

Mr.  W.  C.  Leland,  who  had  charge  of  the  negotiations 
for  Cadillac,  said  that  no  written  option  was  ever  given 
in  the  course  of  the  transaction  which  covered  the  better 
part  of  a  year: 

Our  first  price  was  $3,500,000  good  for  ten  days.  Mr.  Durant  did 
not  return  for  six  months  and  then  said  he  would  accept  that  fig- 
ure. However,  the  situation  had  changed  in  our  favor  in  the  mean- 
time because  Cadillac  had  been  making  exceptionally  good  earn- 
ings, the  country  had  rallied  from  the  slump  of  1907  and  we 
could  see  only  fair  weather  ahead.  Consequently  we  asked  them 
$4,125,000,  this  to  hold  for  another  ten  days.  Mr.  Durant  was  of 
course  tremendously  busy  during  all  this  time  and  I  suppose  he 
had  difficulty  in  finding  the  money  for  what  was  then  a  colossal 
deal  as  we  had  asked  cash.  At  any  rate  the  second  ten-day  period 
expired  before  Mr.  Durant  again  returned,  whereupon  he  was 
given  a  quotation  of  $4,500,000  which  he  accepted.  The  transfer 
was  made  on  that  basis  on  July  29,  1909,  in  cash,  the  transaction 
being  the  largest  negotiated  in  Detroit  up  to  that  time. 

It  should  be  added  in  explanation  that  Cadillac  was 
really  purchased  by  the  Buick  for  General  Motors  to  which 
transfer  followed  shortly  after.  The  net  worth  of  Cadillac 
at  the  time  of  acquisition  was  $2,868,709,  the  difference 
between  that  figure  and  the  purchase  price  representing 
the  good-will  value  which  Cadillac  had  built  up  in  its  seven 
years  of  life.  The  sales  price  represented  slightly  more 
than  $300  a  share  because,  in  addition  to  the  cash  involved, 
$275,000  was  paid  in  Preferred  stocks.  It  is  interesting  to 
record  that  Benjamin  Briscoe  at  one  time  had  an  option 
on  60  percent  of  the  company's  stock  at  $150  per  share. 
But  the  option  expired,  owing  to  his  inability  to  find  cash, 
shortly  before  Mr.  Durant  entered  the  scene  with  his  offer 


The  Turning  Wheel 

of  $160  a  share.  If  the  latter  had  acted  promptly  on  his 
first  option  he  would  have  saved  a  million  dollars.1 

However,  the  price  as  finally  fixed  was  not  at  all  un- 
reasonable, viewed  in  the  light  of  Cadillac's  earnings  at 
the  time  of  these  negotiations,  for  a  net  of  $1,969,382  was 
reported  for  the  year  ending  August  31,  1909.  The  com- 
pany's earnings  continued  at  or  above  this  rate  for  the 
next  ten  months  during  which  Cadillac  turned  into  the 
General  Motors  treasury  $2,000,000.  Both  Henry  M.  and 
W.  C.  Leland  remained  with  Cadillac  until  1917. 

From  its  beginning  Cadillac  has  followed  this  slogan, 
"Craftsmanship  a  Creed,  Accuracy  a  Law."  Various  later 
developments  of  Cadillac  in  its  evolution  toward  its  present 
position  will  be  described  elsewhere,  but  as  the  story  of 
General  Motors  unfolds,  the  reader  will  do  well  to  recall 
that  Cadillac  standards  have  influenced  all  General  Motors 
cars  and  products,  and  indeed  the  whole  automobile  industry. 

aThe  full  purchase  price  was  $5,669,250.  See     p.  223. 

Chapter   VIII 


LMOST  from  the  moment  when  he  reorganized  Buick 
and  increased  its  output,  Mr.  Durant  seems  to  have  begun 
looking  toward  wide  horizons.  Hardly  had  he  moved  Buick 
assembly  to  Jackson  than  he  organized  the  Janney  Motor 
Company  there.  Realizing  that  axles  were  almost  as  im- 
portant as  motors,  he  induced  the  Weston-Mott  Company 
to  move  from  Utica,  New  York,  to  Flint,  allotting  it  a 
strategic  site  in  his  new  industrial  area  next  to  Buick.  With 
Weston-Mott  came  Mr.  C.  S.  Mott,  a  future  director  and 
vice-president  of  the  Corporation.  Mr.  Durant  also  drew 
to  Flint  the  Frenchman,  Albert  Champion,  and  encouraged 
him  to  locate  there  the  production  of  the  famous  AC  spark 
plug.  Forced  at  the  outset  to  lean  on  local  independent 
makers  of  springs  and  bodies,  Mr.  Durant  looked  forward 
to  the  time  when  those  activities  would  be  part  of  a  larger 
picture.  General  Motors  was  beginning  to  take  shape  in  his 

Mr.  Durant  was  not  the  only  man  thinking  along  those 
lines.  Others  perceived  the  difficulties  and  dangers  of  in- 
dependent operations,  and  visioned  from  afar  the  profits 
to  be  garnered  by  a  great  automobile  merger.  On  the  staff 
of  A.L.A.M.  (Association  of  Licensed  Automobile  Manu- 
facturers) was  Hermann  F.  Cuntz,  a  mechanical  engineer 
who  acted  as  contact  man  between  the  Selden  patent 
licensees  and  the  central  office  in  New  York.  He  was  per- 
sonally acquainted  with  all  the  manufacturers  operating 
under  the  Selden  patent.  He  knew  what  they  had  in  their 


112  The  Turning  Wheel 

treasuries  as  well  as  in  their  plants,  whether  their  organiza- 
tions were  strong  or  weak,  and  what  their  prospects  were 
for  future  business.  Possessed  by  the  idea  that  a  merger 
of  certain  products  was  both  feasible  and  advisable,  he  in- 
terviewed Anthony  N.  Brady,  one  of  the  powers  of  Amer- 
ican finance,  who  had  built  a  vast  fortune  through 
consolidating  traction  lines  and  public  utilities. 

C.  S.  MOTT 

Founder,  Weston-Mott  Company 

Mr.  Brady  being  favorable  to  the  idea,  Mr.  Cuntz 
negotiated  with  a  number  of  manufacturers  who  proved 
willing  to  sell  control  at  favorable  prices.  But  Mr.  Brady 
held  off,  prophesying  the  panic  of  1907  and  saying  that 
after  the  automobile  trade  had  experienced  a  taste  of  the 
hard  times  in  store  for  them  the  desired  companies  could 
be  brought  into  the  combine  for  less  money.  The  financier 
was  right  about  the  panic,  which  arrived  according  to  his 
schedule  and  found  him  prepared  for  it,  but  he  was  wrong 
in  estimating  its  effect  upon  the  automobile  trade. 

American  motordom  weathered  the  storm  of  1907  better 
than  any  other  line  of  business.  Buick,  and  the  other  com- 
panies with  which  Mr.  Durant  had  affiliated  himself,  came 
through  without  a  scratch.  In  that  bad  year  Buick  produc- 
tion actually  rose  by  50  percent,  and  Flint  was  one  of  the 
few  cities  in  the  country  unaffected  by  panic.  Its  banks  went 

The  Birth  of  General  Motors        113 

on  paying  out  currency  as  if  nothing  had  happened,  al- 
though currency  payments  were  suspended  in  many  quarters. 

The  effect  of  this  immunity  on  Mr.  Durant  was  twofold. 
It  immensely  enhanced  both  his  confidence  and  his  prestige, 
and  it  placed  various  other  manufacturers,  whose  businesses 
had  proved  less  resistant  to  strain,  in  a  frame  of  mind  where 
they  would  be  willing  to  listen  to  him  when  he  should  be 
ready  to  talk  merger  to  them.  But  whoever  talked  merger 
to  them  effectively  would  have  to  do  so  in  large  figures.  The 
break  in  values  which  Mr.  Brady  had  forecast  for  the  auto- 
mobile world  simply  had  not  come  to  pass.  Instead,  Anthony 
N.  Brady's  opportunity  to  crown  his  business  career  with  a 
stupendous  industrial  merger  had  passed  while  he  hesitated. 
He  still  kept  one  eye  on  automobiles,  however,  becoming 
active  in  United  States  Motor  Company  and  in  1910 
a  director  of  General  Motors,  but  his  chance  to  play  the 
leading  role  in  the  industry  had  departed. 

It  is  interesting  to  speculate  a  little  on  what  might  have 
happened  if  Mr.  Brady,  with  his  large  resources  and  shrewd 
sense,  had  taken  the  lead  in  the  industry  in  1906,  when 
he  was  considering  the  plan  presented  to  him.  Probably 
his  entry  would  have  been  effective  in  bringing  the  auto- 
mobile business  into  the  great  financial  marts  under  proper 
sponsorship  far  earlier  than  it  appeared  there.  Automobile 
securities  might  have  appeared  on  the  New  York  Stock 
Exchange  in  1908  instead  of  in  1911,  when  the  voting  trust 
certificates  of  the  General  Motors  Company  were  the  first 
automobile  securities  listed  by  the  Stock  Exchange.  The 
whole  automobile  industry  might  have  been  given  a  definite 
and  enduring  trend  toward  the  East,  with  the  early  New 
England  companies  growing  instead  of  dwindling  as  they 
actually  did,  and  the  Middle  Western  companies  not  mak- 
ing the  headway  which,  historically,  they  have  made.  If  Mr. 
Brady  had  organized  General  Motors  instead  of  Mr. 
Durant,  the  Corporation  might  have  lost  much  of  the 
dramatic  interest  now  attached  to  it. 

With  Buick  standing  like  a  rock  through  1907  and  swing- 
ing into  1908  at  a  pace  which  promised  a  strong  financial 
position  at  the  end  of  the  year,  Mr.  Durant  was  ready 
to  proceed  with  his  merger.  He  planned  the  erection  of  a 

114  The  Turning  Wheel 

corporation  which  would  be  merely  a  holding  company,  of 
which  there  were  many  examples  among  the  "trusts"  of  the 
period.  We  shall  see  how  General  Motors  changed  from  a 
holding  company  to  an  operating  company  under  the  press- 
ure of  economic  forces  too  strong  to  be  withstood,  as  the 
automobile  made  its  way  into  large  production  and  broad 
relations  with  the  consuming  public.  In  general,  American 
economic  history  shows  that  while  holding  companies  meet 
with  little  difficulty  in  the  public  utility  field,  where  mon- 
opoly and  state  regulation  are  involved,  they  do  less  well  in 
the  manufacturing  field,  where  large  labor  forces  must  be 
maintained  and  style  goods  sold  in  open  competition. 

Spurned  in  Chicago  by  a  shortsighted  luminary  of  the 
Bar,  Mr.  Durant  took  himself  to  a  young  lawyer  of  New 
York,  Curtis  R.  Hatheway,  of  Ward,  Hayden  &  Satterlee, 
who  drew  up  articles  of  incorporation  for  the  General 
Motors  Company  of  New  Jersey.  The  company  was  em- 
powered to  use  its  capital  of  $12,500,000  (authorized 
September  28,  1908)  in  the  purchase  of  the  securities  of 
automobile  and  accessory  companies. 

The  certificate  of  incorporation  of  the  General  Motors 
Company  was  signed  by  the  incorporators,  George  E. 
Daniels,  Benjamin  Marcuse,  and  Arthur  W.  Britton  on 
September  15,  1908,  and  filed  in  the  office  of  the  clerk  of 
Hudson  County,  New  Jersey,  the  same  day.  The  following 
day,  it  was  filed  in  the  office  of  the  Secretary  of  State  of 
New  Jersey  at  Trenton.  As  the  New  Jersey  statute  declares 
that  the  filing  in  the  latter  office  determined  the  date  of  the 
body  corporate,  the  latter  date,  September  i6th,  has  been 
accepted  as  marking  the  birth  of  General  Motors. 

The  incorporators  met  on  September  22d,  adopting  by- 
laws under  which  they  became  the  first  directors  and 
officers,  as  follows: 

George  E.  Daniels,  president 

Benjamin  Marcuse,  secretary  and  treasurer 


Arthur  W.  Britton 
George  E.  Daniels 
Benjamin  Marcuse 

The  Birth  of  General  Motors        115 

On  October  20,  1908,  the  by-laws  were  changed  to  pro- 
vide for  a  board  of  seven  directors  and  the  original  officers 
were  succeeded  by  the  following  who  held  office  for  con- 
siderable periods: 

W.   M.   Eaton,   president   from  October   20,    1908,   to 

November  23,  1910 
W.  C.  Durant,  vice-president  from  October  20,  1908,  to 

November  16,  1915 
C.  R.  Hatheway,  secretary  and  treasurer  from  October 

20,  1908,  to  January  26,  1911 

It  will  be  noted  that  Mr.  Durant  appears  as  vice-presi- 
dent, though  he  was  actually  the  founder  and  active  head 
of  the  organization.  By  placing  Mr.  Eaton,  an  influential 
business  man  of  Jackson,  in  the  highest  office,  Mr.  Durant 
left  himself  free  for  more  active  duties.  The  three  incor- 
porators  were  all  out  of  the  directorate  by  the  end  of  the 
year,  Mr.  Britton  being  succeeded  by  Henry  Henderson, 
and  Messrs.  Daniels  and  Marcuse  by  Messrs.  C.  R.  Hathe- 
way and  Frederic  L.  Smith  on  December  i6th,  after  which 
meeting  the  board  consisted  of: 

W.  C.  Durant  elected  October  20,   1908 

W.  M.  Eaton 

C.  R.  Hatheway 

Henry  Henderson 

W.  J.  Mead 

Frederic  L.  Smith  "       December   16,   1908 

Henry  Russel 

Theodore  F.  MacManus  in  Men,  Money,  and  Motors 
gives  a  vivid  recital  of  the  origin  and  naming  of  General 
Motors,  which  exemplifies  the  offhand  way  in  which  the 
dashing  founder  arrived  at  his  decisions: 

The  automobile  business  was  a  hazardous  business.  Durant  appreci- 
ated this.  His  azure  dreams  of  power  were  often  disturbed  by 
nightmare  flashes.  Fly-by-night  concerns  with  no  objective  save  a 

116  The  Turning  Wheel 

skimming  of  the  market  and  immediate  profits  for  their  promoters 
were  everywhere.  Durant  realized  there  had  to  be  stabilization. 
Early  in  1908  he  proposed  to  Ford,  Couzens,  Briscoe,  and  Olds  a 
consolidation  of  Ford,  Maxwell-Briscoe,  Reo,  and  Buick. 

Ford  and  Couzens  played  with  the  idea,  matched  their  wits 
against  the  wits  of  the  others  and  when  Durant  appeared  most 
hopefully  they  tossed  in  this  stipulation : 

"We  will  go  in  only  on  condition  that  we  receive  three  million 
dollars,  in  cash." 

Not  to  be  outdone  by  the  Ford  and  Couzens  ultimatum,  R.  E. 
Olds  got  to  his  feet  and  pronounced  sentence  on  the  consolidation : 

"If  you  do  that  for  Ford  you've  got  to  do  likewise  by  Reo.  We 
will  expect  three  millions,  in  cash,  also." 

Durant  waved  his  hands.  The  meeting  ended.  The  project  was 

Durant,  however,  was  not  easily  discouraged.  Calling  aside  Ben- 
jamin Briscoe,  he  said: 

"Let's  go  it  alone.  We  two." 

Briscoe  was  willing  and  the  two  men  went  to  see  George  W. 
Perkins,  of  J.  P.  Morgan  &  Co.  The  bankers  agreed  to  underwrite 
$500,000  of  the  new  $1,500,000  capital  required.  A  charter  was 
tentatively  drawn  up  and  the  consolidation  was  to  be  called  the 
International  Motors  Company. 

These  negotiations  fell  through,  but  since  a  representa- 
tive of  the  banker  had  suggested  the  name  "International 
Motors"  Mr.  Durant  crossed  out  the  word  "International" 
and  wrote  in  "General." 

Mr.  MacManus  writes : 

"How  does  that  look?"  he  asked,  holding  it  so  Briscoe  could  see. 

"Fine.  You  mean  you'll  call  your  organization  the  'General 
Motors  Company'?" 


Briscoe  left.1  Durant  sat  there,  studying  the  sheet  of  paper  on 
which  he  had  written — almost  carelessly  had  written — a  name  that 
has  come  to  be  familiar  around  the  world. 

aBriscoe's  United  States  Motor  Company  was  dissolved  through  receiver- 
ship in  1912.  Its  backbone  was  the  Maxwell-Briscoe,  which  Benjamin  Bris- 
coe organized  in  1904  with  $42,000  in  cash.  MacManus  says  that  Mr.  Durant 
offered  the  equivalent  of  $5,000,000  in  General  Motors  stock  for  Maxwell- 
Briscoe,  saying  that  this  bloc  would  have  been  worth  $200,000,000  later  and 
in  the  meantime  would  have  paid  $35,000,000  in  dividends. 

The  Birth  of  General  Motors        117 

Mr.  Durant  considers  that  here  and  there  in  Men, 
Money,  and  Motors  he  is  not  reported  with  entire  accuracy 
by  Mr.  MacManus,  who  is  somewhat  given  to  dramatic 
rhetoric  while  Mr.  Durant  was  ever  precisely  polite  in  his 
choice  of  words  in  conversation.  As  to  the  name,  General 
Motors,  Mr.  F.  L.  Smith  says  in  his  published  reminiscences 
that  he  contributed  it  some  time  before  in  a  Lansing  con- 
ference looking  toward  the  merger  of  Buick  and  Oldsmobile. 

Amid  what  seems  almost  a  conspiracy  of  silence  General 
Motors  was  born.  The  New  York  Times  of  September 
1 6th,  conned  by  Mr.  MacManus,  revealed  that: 

President  Theodore  Roosevelt  was  in  a  jovial  mood.  "Bully!"  he 
cried  when  reporters  told  him  that  Charles  Evans  Hughes  had 
been  nominated  for  Governor  of  New  York  state  on  the  Repub- 
lican ticket  .  .  .  Mike  Donovan,  an  athletic  trainer,  was  on  his 
way  to  the  Roosevelt  home  at  Oyster  Bay  and  when  approached  by 
newspaper  men  he  vowed :  "I  am  going  to  write  a  book  on  Teddy 
— he  deserves  it!" 

Justice  Davis  decided  against  the  city  in  its  case  against  an  auto- 
ist  who  had  been  arrested  in  Central  Park  the  preceding  December 
16:  "The  charge  against  this  man  is  driving  with  skid  chains  and 
the  law  does  not  prohibit  their  use,"  declared  the  Court. 

The  White  Star  Company  announces  the  construction  of  two  new 
ocean  liners,  the  keel  to  one  ship  is  now  being  laid  and  it  will  be 
called  the  Olympic;  the  keel  to  the  second  ship  will  be  laid  later 
and  it  will  be  called  the  Titanic. 

New  Jersey  had  a  flyer  who  was  critical  of  the  Wright  aeroplane 
as  compared  with  his  own;  Wilbur  Wright  remained  in  the  air 
over  LeMans,  France,  for  thirty-nine  minutes  and  broke  distance 
records  by  flying  twenty-six  miles. 

Jack  Johnson  and  Tommy  Burns  were  matched  for  the  heavy- 
weight championship  of  the  world  and  agreed  to  fight  in  Sydney, 

But  there  was  no  mention  of  the  incorporation  of  Gen- 
eral Motors,  and  no  wonder,  since  the  original  incorpora- 
tion was  for  only  $2,000,  a  nominal  sum  soon  increased. 

Except  in  Flint,  the  fledgling  corporation  seems  to 
have  attracted  little  attention  at  the  start.  Horseless  Age, 
then  the  leading  journal  of  the  automotive  trade,  gave  no 

118  The  Turning  Wheel 

extensive  notice  until  December  3Oth,  when  it  was  stirred 
by  the  Olds  negotiations  to  publish  the  following : 


The  formation  of  the  General  Motors  Company  as  a  New  Jersey 
corporation,  and  offers  of  an  exchange  of  stock  made  to  stock- 
holders of  the  Olds  Motor  Works,  of  Lansing,  Michigan,  have 
started  anew  rumors  of  the  consolidation  of  automobile  manufac- 
turing interests.  Considerable  secrecy  is  maintained  in  regard  to 
the  new  company,  which  is  said  to  be  capitalized  at  $12,500,000, 
divided  into  $7,000,000  Preferred  stock  and  $5,500,000  Common 
stock,  each  share  having  a  par  value  of  $i.  At  present  the  new 
company  is  said  to  embrace  the  Buick  Motor  Company,  of  Flint, 
Michigan,  and  the  Olds  Motor  Works,  of  Lansing,  Michigan. 
Reports  from  Lansing,  Michigan,  state  that  the  stockholders  of 
the  Olds  Motor  Works  have  been  approached  with  a  proposition 
to  exchange  their  shares  for  shares  of  the  General  Motors  Com- 
pany, the  basis  for  the  exchange  being  $400  in  Preferred  stock  and 
$IOO  in  Common  stock  of  the  General  Motors  Company  for  each 
$i,OOO  of  the  Olds  Motor  Works  stock.  There  is  said  to  be  con- 
siderable opposition  on  the  part  of  some  Olds  stockholders,  al- 
though it  is  said  that  holders  of  three-fourths  of  the  stock  have 
assented.  Attorney  C.  R.  Hatheway,  of  the  law  firm  of  Ward, 
Hayden  and  Satterlee,  is  said  to  be  engineering  the  deal,  but  re- 
fused to  make  any  statement  at  present.  The  General  Motors  Com- 
pany has  an  office  in  the  Terminal  Building,  Forty-first  Street 
and  Park  Avenue,  New  York  City,  but  the  manager  was  said  to 
be  "extremely  busy"  and  could  not  be  seen.  The  plan  is  said  to 
be  to  continue  the  different  works  as  at  present  under  their  proper 
names,  assigning  to  each  the  manufacture  of  certain  types  of 
vehicles.  The  General  Motors  Company  will  act  as  a  holding  con- 
cern, and  appoint  the  directors  of  the  subsidiary  companies. 

On  September  29th  General  Motors- bought  from  W.  C. 
Durant  18,870  shares  of  Buick  Common  and  1,130  shares 
of  Preferred  at  $150  a  share,  payable  two  thirds  in  General 
Motors  Preferred  and  one  third  in  Common.  The  new  hold- 
ing company  purchased  the  W.  F.  Stewart  Company  body 
plant,  directly  across  from  Buick  for  $240,000  in  stock, 
and  leased  it  to  Buick.  Then  began  the  Olds  negotiations, 

The  Birth  of  General  Motors        119 

detailed  elsewhere,  which  were  the  first  notices  given  the 
automobile  world  outside  of  Flint  that  a  colossal  merger 
had  been  begun. 

When  Oakland  entered  General  Motors  within  the 
month,  the  automobile  world  did  not  need  to  be  reminded 
again  that  here  was  something  worth  watching.  Buick, 
Oldsmobile,  and  Oakland — three  of  the  largest  plants  and 
three  of  the  "best  names"  in  the  industry — had  been 
brought  together  in  less  than  three  months.  Further  ac- 
quisitions soon  followed.  A  few  notes  amplifying  the  min- 
utes of  the  young  corporation  indicate  how  simply  the  three 
original  companies  were  "digested"  and  more  companies 

February  23,  1909,  General  Motors  declared  its  first  semi-annual 
dividend  of  $3.50  on  its  Preferred  stock — a  dividend  never  missed 
from  that  day  to  this.  This  dividend  was  payable  April  I  on  stock 
of  record,  March  20. 

On  June  5,  the  directors  heard  the  good  news  that  all  Buick 
Common  stock  had  been  converted  into  General  Motors  stock  on 
the  agreed  basis  of  $150  a  share,  payable  two  thirds  in  Preferred 
and  one  third  in  Common,  and  also  all  but  fifteen  shares  of  the 
5,000  outstanding  Buick  Preferred,  a  remarkable  example  of 
stockholder  confidence  in  a  new  enterprise.  On  September  10  the 
directors  voted  to  increase  the  capital  stock  to  $60,000,000— 
200,000  shares  of  Preferred  and  400,000  shares  of  Common. 

The  Olds  union  was  completed  by  the  purchase  of  the  Seager 
Engine  Works  in  September  and  the  last  of  Oakland's  stock 
passed  to  General  Motors  about  the  same  time,  though  the  price 
of  the  last  purchase  rose  considerably,  as  the  directors  authorized 
the  final  purchase  at  $30  whereas  the  first  blocks  had  been  secured 
at  $10  and  $11  a  share. 

In  what  must  be  reckoned  a  terrific  outburst  of  corporate 
energy,  the  following  units  were  added  to  the  General 
Motors  family,  either  through  purchase  of  all  stock  or  a 
substantial  interest,  in  less  than  two  years : 

Champion  Ignition  Co.,  Flint  (later  AC  Spark  Plug  Co.) 
Weston-Mott  Company,  Flint 
Reliance  Motor  Truck  Co.,  Owosso 
Rainier  Motor  Co.,  Saginaw 
Michigan  Motor  Castings  Co.,  Flint 

120  The  Turning  Wheel 

Welch  Motor  Car  Co.,  Pontiac 

Welch-Detroit  Co.,  Detroit 

Cadillac  Motor  Car  Co.,  Detroit 

Jackson-Church-Wilcox  Co.,  Jackson 

Michigan  Auto  Parts  Co.,  Detroit 

Rapid  Motor  Vehicle  Co.,  Pontiac 

Cartercar  Co.,  Pontiac 

Ewing  Automobile  Co.,  Geneva,  Ohio 

Elmore  Manufacturing  Co.,  Clyde,  Ohio 

Dow  Rim  Co.,  New  York  City 

Northway  Motor  &  Manufacturing  Co.,  Detroit 

National  Motor  Cab  Co. 

Also  stock  interests  were  taken  in  Maxwell-Briscoe,  the 
United  Motors  Company  and  Lansden  Electric. 

By  the  end  of  1909  General  Motors  had  acquired  or  sub- 
stantially controlled  more  than  twenty  automobile  and 
accessory  companies.  Two  other  prospective  purchases  nar- 
rowly missed  fire — Thomas  and  Ford.  October  26th,  A.  H. 
Goss  offered  to  sell  to  General  Motors  the  entire  capital 
stock  of  the  E.  R.  Thomas  Company  of  Buffalo,  and  on 
the  same  day  the  directors  authorized  the  purchase  of  the 
entire  capital  stock  of  the  Ford  Motor  Company  of  De- 
troit for  $8,000,000 — $2,000,000  down  and  the  balance 
in  one  and  two  years,  "if  arrangements  can  be  made  to 

Fateful  "if!"  Apparently  arrangements  could  not  be 
made  to  finance.  Mr.  Ford  held  out  for  cash,  the  young 
holding  company  did  not  have  the  cash  and  bankers  could 
not  be  found  who  would  risk  $8,000,000  on  an  industrial 
property  which  has  since  become  one  of  the  most  valuable 
in  the  world. 

Henry  Ford  and  James  Couzens  were  at  the  Belmont  Hotel,  in  New 
York  City  [writes  T.  F.  MacManus  in  Men,  Money,  and 
Motors].  They  were  together  in  their  room  and  Ford,  suffering 
from  lumbago,  was  lying  on  the  floor  because  there  was  no  com- 
fort for  him  in  bed.  The  telephone  bell  jangled  and  Couzens,  pick- 
ing up  the  receiver,  heard  a  voice : 

"This  is  Billy  Durant.  I'd  like  to  see  you." 

"What  about?" 

The  Birth  of  General  Motors        121 

"I  can  tell  you  when  I  see  you." 

Returning  upstairs  within  a  half  hour  Couzens  .  .  .  said: 

"Billy  Durant  wants  to  buy  the  Ford  Motor  Company." 

"How  much  will  he  pay?" 

"Eight  million  dollars." 

"All  right.  But — gold  on  the  table!"  snapped  Ford. 

"How  do  you  mean  that?" 

"I  mean  cash." 

Durant  came  back  the  following  morning,  and  Couzens  delivered 
Ford's  message.  The  two  men  shook  hands  on  the  proposition  and 
Durant  left  to  raise  the  necessary  money.  With  him  he  had  a 
resume  of  the  Ford  business  and  its  prospects.  The  capital  stock  of 
the  Ford  company  was  $2,000,000  and  it  had  a  surplus  of 
$1,180,000,  exclusive  of  goodwill  and  patents.  Its  earnings  in 
1908  were  $2,684,000  on  a  business  of  $9,000,000  and  it  was 
planning  to  do  a  business  of  $15,000,000  in  1909  including  an  out- 
put of  21,000  automobiles.  Durant  had  reached  an  agreement  with 
Couzens  to  pay  $2,000,000  in  cash  and  the  balance  in  one  and 
two  years. 

On  October  26,  1909,  Durant  received  the  sanction  of  his  board 
of  directors  for  the  acquisition  of  the  Ford  business,  went  back  to 
his  bankers  and  was  informed : 

"We  have  changed  our  minds.  The  Ford  business  is  not  worth 
that  much  money." 

Yet,  as  between  the  purchase  of  Ford  and  the  purchase 
of  the  E.  R.  Thomas  Company,  both  of  which  failed  to 
materialize,  probably  the  latter  would  have  attracted  the 
more  public  attention  in  1909.  Mr.  Ford  had  not  then  be- 
come the  public  figure  he  is  today,  and  the  Thomas  Flyer 
was  a  phrase  on  the  lips  of  everyone,  as  the  nation  had  fol- 
lowed its  victorious  race  from  New  York  to  Paris,  three 
quarters  of  the  way  around  the  world,  via  Siberia,  a  contest 
waged  on  three  continents  and  over  wretched  roads,  the 
sternest  test  met  by  an  American  car  up  to  that  time. 

General  Motors  swallowed  so  many  companies  in  its  first 
two  years  that  acute  indigestion  followed  as  a  matter  of 
course.  Since  the  whole  industry  was  young  in  engineering 
experience,  Mr.  Durant  bought  certain  companies  of  un- 
proved productive  power  simply  because  they  were  believed 
to  have  basic  patents  or  features  which  might  be  important 
later.  Cartercar,  for  instance,  was  purchased  while  the 

122  The  Turning  Wheel 

selective  transmission  and  the  friction  drive  were  still  in 
rivalry.  The  possibility  that  the  latter  might  develop  made 
the  Carter  patents  seem  worth  while.  Elmore,  too,  was 
thought  to  have  basic  patents  on  a  two-cycle  engine  which 
might  prove  valuable.  Other  "buys11  were  made  to  assure 
regular  supplies  of  material  and  parts. 

Some  of  the  purchases  were  soon  seen  to  be  untenable. 
Welch  of  Pontiac,  for  instance,  entered  the  General  Motors 
family  on  June  5,  1909,  and  was  on  its  way  out  within  five 
months,  decision  to  sell  being  taken  on  October  26th. 
Welch-Detroit  remained  longer,  though  it  never  could  be 
brought  to  a  profitable  position.  The  Welch  brothers,  both 
noted  engineers,  had  developed  a  large,  heavy  car  of  ad- 
vanced design,  which  was  expected  to  take  place  as  the 
price-leader  of  General  Motors.  But  Fred  Welch,  the  driv- 
ing force  in  the  enterprise,  was  drowned  in  Lake  St.  Clair, 
and  without  him  the  operation  languished  to  the  point 
where  it  had  to  be  cut  adrift. 

Others  could  not  be  brought  quickly  to  the  point  of 
carrying  themselves  and  required  capital  outlays  burden- 
some to  the  holding  company.  Ewing,  Elmore,  Cartercar, 
Rainier,  and  Dow  Rim  Company  are  examples  of  projects 
that  cost  General  Motors  more  than  they  returned.  No 
doubt,  several  of  these  properties  were  "unloaded"  on 
General  Motors  in  the  rush  of  1909,  but  the  sellers  prob- 
ably did  not  wait  for  the  enormous  profits  which  would 
have  been  theirs  if  they  had  held  for  a  long  period  the 
securities  they  then  received.  For  instance,  Dow  Rim  Com- 
pany was  purchased  on  November  27,  1909,  for  $28,000 
in  General  Motors  Preferred  and  $20,000  in  notes,  Mr. 
Alexander  Dow  electing  to  take  notes  instead  of  an  amount 
of  Common  stock  which  later  had  a  value,  according  to 
his  own  estimate,  of  several  million  dollars.  Dow  Rim  was 
written  down  to  $i  on  the  company's  books  in  1911. 

Mr.  Goss,  whose  effort  to  sell  the  E.  R.  Thomas  Com- 
pany to  General  Motors  came  to  naught,  sold  the  Elmore 
Manufacturing  Company  of  Clyde,  Ohio,  to  the  Company 
for  $600,000  in  General  Motors  Preferred  at  par.  Mr. 
Goss  was  later  active  in  Buick  and  General  Motors  affairs. 

The  Birth  of  General  Motors        123 

Another  addition  destined  soon  to  fall  by  the  wayside 
was  the  Ewing  Automobile  Company  of  Geneva,  Ohio, 
purchase  of  which  was  authorized  on  October  26,  1909, 
and  written  down  to  $i  on  June  14,  1911. 

Less  disastrous  but  nevertheless  troublesome  was  the 
Rainier  purchase.  The  big  Rainier  car  not  having  found  a 
market,  the  directors  on  March  29,  1909,  incorporated  the 
Marquette  Motor  Company  in  Michigan  for  $300,000  to 
take  over  all  the  Rainier  assets,  the  idea  being  to  use  the 
Saginaw  plant  for  the  production  of  a  light  Marquette  car. 
Some  of  the  difficulties  encountered  there  will  be  related 
in  another  chapter. 

Net  sales  of  General  Motors,  by  all  its  units,  for  the  first 
year  of  operations,  ending  October  i,  1909,  were  $29,029,- 
875,  and  net  income  available  for  dividends,  $9,114,498,  a 
truly  impressive  record  which  was  the  result  of  the  com- 
bined labors  of  14,250  persons.  No  wonder  General  Motors 
was  hailed  at  the  end  of  its  first  year  as  the  lustiest  indus- 
trial infant  ever  born  in  America,  and  a  stock  dividend  of 
150  percent  on  the  Common  stock,  declared  November 
1 5th,  seemed  to  be  entirely  justified. 

The  directors  at  their  memorable  meeting  of  October  26, 
1909,  found  that  the  Company  had  four  reliable  producers. 
Buick  and  the  newly  purchased  Cadillac  could  certainly  be 
classified  as  dependable;  Oakland  was  also  doing  well  and 
Olds  had  excellent  prospects.  The  situation  seemed  rosy  in 
the  extreme,  but  within  a  few  months  changed  rapidly  for 
the  worse. 

In  spite  of  substantial  earnings  and  encouraging  stock 
sales,  a  cool  survey  would  have  revealed  the  dangers  of  the 
situation.  Because  of  the  rapidity  with  which  the  various 
units  had  been  gathered  into  the  fold,  there  could  be  no 
certainty  of  uniform  bookkeeping  as  yet  and  probably  no 
exact  knowledge  of  inventory  commitments.  Consequently, 
the  liabilities  were  very  likely  larger  than  appeared  and 
the  surplus  smaller.  Furthermore,  of  course,  plant  and  ma- 
terial assets  could  not  be  made  liquid  easily.  Nevertheless, 
there  was  the  comforting  thought  that  the  company  now 
had  stock  to  sell,  the  authorized  capitalization  having  been 
increased  on  September  10,  1919,  to  $60,000,000;  200,000 

124  The  Turning  Wheel 

shares  of  Preferred  stock  and  400,000  shares  of  Common, 
all  $100  par.  The  directors'  faith  in  Mr.  Durant's  ability 
to  sell  stock  was  enough  to  keep  the  company  on  its  way 
buying  and  building. 

In  January,  1910,  the  directors  authorized  purchase,  up 
to  $400,000,  of  shares  of  the  Randolph  Motor  Car  Com- 
pany, a  commercial  vehicle  manufacturer,  and  added  $100,- 
ooo  to  its  capitalization. 

At  the  same  meeting  a  fateful  decision  was  reached  to 
invest  in  Heany  electric  stocks  by  trading  in  8,290  shares 
of  General  Motors  Preferred  and  74,775  shares  of  Gen- 
eral Motors  Common.  John  Albert  Heany  claimed  to  be 
the  inventor  of  the  modern  tungsten  filament  electric  light, 
which,  in  fact,  worked  a  revolution  in  illumination.  Un- 
fortunately for  General  Motors,  his  patent  claims  were  not 
upheld  by  the  Patent  Office.  Even  if  all  had  been  plain  sail- 
ing, buying  into  the  Heany  companies  was  buying  into  a 
lawsuit.  On  May  5,  the  Company  plunged  deeper  into  the 
Heany  venture. 

One  of  the  historic  moves  of  the  Company  in  1910  was 
the  incorporation  in  Canada  for  $1,200,000  (12,000 
shares)  of  McLaughlin  Motor  Car  Company,  Ltd.  At 
Oshawa,  cooperation  between  the  McLaughlin  carriage  in- 
terests and  Buick  had  brought  Buick  profitably  into  the 
great  Canadian  market.  Of  the  12,000  shares  in  the  new 
McLaughlin  company,  5,000  were  taken  by  Buick.  Out  of 
this  company  General  Motors  of  Canada,  Ltd.,  would  in 
time  emerge. 

The  faster  a  man  or  an  institution  travels  the  more  seri- 
ous is  a  stumble.  To  maintain  the  tempo  of  that  surprising 
period  both  a  high  ratio  of  earnings  to  sales  and  capital 
inflow  were  necessary.  Michigan  had  supported  the  enter- 
prise loyally  with  stock  subscriptions,  but  Michigan  was 
not  then  a  rich  state  in  liquid  resources ;  the  cream  of  capital 
had  already  been  skimmed.  Mr.  Durant  had  to  go  further 
afield  for  money.  While  Buick,  Oakland  and  Cadillac  were 
making  substantial  earnings  and  Olds  was  being  revived, 
various  of  the  lesser  companies  were  losing.  General 
Motors  was  increasing  its  volume  but  not  its  earnings,  yet 
expansion  had  been  predicated  on  more  profits.  By  May, 

The  Birth  of  General  Motors        125 

1910,  Flint  knew  something  had  happened  when  new  con- 
struction suddenly  stopped  at  Buick  and  lay-offs  became 
chronic.  Nevertheless,  the  greatly  daring  chairman  of  the 
executive  committee  reported  on  June  2ist  to  the  directors 
that  he  had  certain  negotiations  with  Willys-Overland 
Company  under  way,  looking  to  acquisition.  The  directors 
must  have  gasped  when  they  heard  that,  for  General 
Motors  now  needed  to  be  saved  from  the  penalties  of  too 
rapid  expansion  rather  than  be  expanded  still  farther. 

Mr.  Durant  rallied  to  the  feat  of  saving  his  great  enter- 
prise with  his  usual  intrepidity.  He  dropped  everything 
else  to  search  for  money.  Until  this  pinch,  he  had  perhaps 
not  taken  bankers  quite  as  seriously  as  business  leaders 
must  take  the  guardians  of  public  funds.  It  would  be 
pleasant  now  to  have  behind  him  the  inexhaustible  resources 
of  J.  P.  Morgan  &  Company,  a  connection  which  had  been 
possible  at  an  earlier  stage. 

The  situation  had  changed  with  such  rapidity  that  ade- 
quate relief  was  hard  to  find.  In  talks  to  bankers,  the 
extraordinary  earnings  of  Cadillac  were  cited  as  con- 
tributing $2,000,000  to  General  Motors  coffers  within  the 
year  after  its  purchase.  Always  the  reply  came  back  that 
Cadillac  could  have  the  money  if  it  stood  alone,  but  as  it 
could  not  be  unscrambled  from  General  Motors  and  since 
this  was  intended  to  be  a  loan  to  General  Motors  it  was, 
therefore,  not  forthcoming.  Even  Cadillac  itself  was  in 
danger.  An  emergency  joint  meeting  of  the  boards  of  the 
First  National  and  Old  National  banks  of  Detroit  loaned 
Cadillac  $500,000  a  few  hours  in  advance  of  a  pay  roll 
which  otherwise  could  not  have  been  met.  This  whole  epi- 
sode reveals  an  astonishing  degree  of  banking  blindness 
both  as  to  the  safety  of  a  specific  loan  and  as  to  the  possi- 
bilities of  the  industry.  Modern  practice  accepts  the  earn- 
ings of  subsidiaries  as  the  element  properly  to  be  considered 
in  establishing  the  credit  of  a  holding  company.  Bankers 
now  understand,  also,  that  loans  to  going  industries  are  part 
of  their  own  social  responsibility,  since  such  loans  preserve 
employment  and  community  values.  The  fact  that  Mr. 
Durant  had  prophesied  that  300,000  automobiles  would 
be  produced  annually  in  America  had  been  a  shock  to  many 

126  The  Turning  Wheel 

conservative  bankers,  who  began  to  prophesy  doom  for  the 
Republic  if  that  incredibility  should  come  to  pass.  The 
automobile  "craze"  was  likened  to  the  bicycle  "craze"  of 
a  few  years  before,  the  passing  of  which  had  brought  finan- 
cial disaster  to  many  companies.  It  was  in  the  face  of  such 
hostility  that  the  young  General  Motors  Company  went  out 
hunting  for  credit. 

Buick  pay  rolls  were  also  troublesome.  Harry  K.  Noyes, 
its  Boston  distributor,  saved  the  day  for  Buick  by  expressing 
to  Flint  suitcases  full  of  specie  and  currency.  Mr.  Noyes  also 
collected  company  money,  banked  it  in  his  own  name  and  re- 
mitted direct  instead  of  through  banks,  so  that  the  money 
would  be  available  for  pay  rolls:  otherwise  it  might  have 
been  applied  on  an  overdraft. 

In  desperation  Mr.  Durant  went  West  after  the  East 
failed  him.  The  West  must  help  him,  he  thought,  because 
the  West  needed  motor  cars;  it  was  in  the  West  that  he  had 
built  up  Buick  trade  so  phenomenally.  But  Kansas  City,  St. 
Louis  and  Chicago  bankers  declined  to  aid.  Returning  dis- 
couraged from  this  journey,  Durant  and  Goss  picked  up 
A.  B.  C.  Hardy  in  Chicago.  The  latter  relates  the  following 
as  evidence  of  his  hero's  sunny  courage  under  pressure: 

The  train  stopped  in  Elkhart,  Indiana,  in  a  pouring  rainstorm.  Far 
down  the  dark  and  dismal  street  shone  one  electric  sign — BANK. 
Durant  shook  Goss,  who  was  dozing  dejectedly  in  a  corner. 
"Wake  up,  Goss,"  said  the  leader.  "There's  one  bank  we  missed." 

The  Chicago  negotiations  almost  saved  the  day.  A  loan 
of  $7,500,000  was  arranged  with  the  Continental  and  Com- 
mercial Savings  and  Trust  Company.  Then  it  was  raised 
to  $9,500,000.  Then  it  was  rescinded.  The  longer  the 
situation  waited  the  worse  it  grew,  partly  because  decreas- 
ing confidence  brought  demands,  partly  because  investiga- 
tions revealed  growing  liabilities,  a  condition  easily  ex- 
plainable in  view  of  the  independent  operations  of  the 
various  units  and  the  lack  of  uniform  accounting.  One  item 
in  the  minutes  makes  it  quite  clear,  for  instance,  that  the 
directors,  on  September  iQth,  did  not  know  how  much 
money  Oakland  owed.  By  the  time  $7,500,000  had  been 

The  Birth  of  General  Motors        127 

borrowed,  $9,500,000  was  needed,  and  by  the  time  $9,- 
500,000  was  available,  $12,000,000  was  needed. 

Retrenchments  were  hurriedly  begun;  the  number  of 
employees  declined  by  4,250  to  a  total  of  10,000.  The 
irony  of  the  situation  lay  in  the  fact  that  net  sales  were 
nearly  double  those  of  the  preceding  year,  reaching  a  total 
of  $49,430,179.  But  the  business  had  been  done  at  a  closer 
margin,  net  income  being  only  $10,225,367  or  slightly  more 
than  $1,000,000  above  1909.  The  rate  of  profit  had  de- 
clined while  commitments  had  increased;  between  the  two, 
General  Motors  was  caught  as  in  a  vise. 


By  September  nearly  all  those  interested  had  given  up 
hope,  but  Mr.  Durant  saw  one  avenue  of  escape.  His 
previous  efforts  to  raise  money  had  been  based  on  a  con- 
tinuance of  his  management.  In  the  East  he  found  that  he 
could  save  the  company  if  he  stepped  out.  J.  &  W.  Selig- 
man  &  Company  of  New  York  and  Lee,  Higginson  &  Com- 
pany of  Boston,  were  interested  on  that  basis,  not  otherwise. 
The  money  centers  of  the  East  were  conservative;  Mr. 
James  J.  Storrow  of  Lee,  Higginson,  who  arranged  the 
rescue,  represented  a  school  of  financial  thought  which 
could  not  approve  the  dashing  methods  and  hairbreadth 
adventures  which  characterized  General  Motors  in  its 

128  The  Turning  Wheel 

infancy.  With  Mr.  Albert  Strauss  of  Seligman's  he  decided, 
further,  that  the  situation  had  gone  so  far  that  not  only 
a  change  of  management  but  also  a  trusteeship  was  re- 
quired. The  terms  were  hard,  but  in  no  other  way  could  a 
receivership  be  avoided,  so  pressing  was  the  need  for  funds. 
Mr.  Durant  swallowed  his  pride  and  stepped  down. 

The  arguments  against  receivership  were  of  a  sort  to 
appeal  to  both  the  bankers  and  Mr.  Durant.  Times  were 
good  but  not  too  good.  A  crash  of  such  proportions  might 
have  unsettled  the  country,  and  surely  would  have  been 
disastrous  in  areas  where  General  Motors  operated,  espe- 
cially in  Pontiac  and  Flint  which  had  been  growing  rapidly 
on  the  basis  of  Buick  and  Oakland  expansion,  and  where 
even  the  shadow  of  a  shut-down  already  had  created  distress 
and  political  unrest.  Mr.  Durant  was  quite  aware  of  these 
local  considerations  which  weighed  heavily  on  the  citizens  of 
Michigan  who  had  backed  his  enterprise.  The  trusteeship 
seemed  to  be  the  only  way  out. 

On  September  yth,  when  the  directors  rescinded  the 
Chicago  loan,  they  authorized  the  sale  of  the  Michigan 
Auto  Parts  Company  and  Welch-Detroit,  probably  on  the 
hint  that  a  disposition  to  trim  ballast  would  be  acceptable: 
ten  days  later  they  were  willing  to  sell  Marquette.  Then, 
on  September  26th,  after  three  weeks  of  anxious  negotia- 
tions, the  board  authorized  the  loan  of  $15,000,000  from 
J.  &  W.  Seligman  &  Company  of  New  York  and  Lee,  Hig- 
ginson  &  Company  of  Boston. 

The  situation  proved  to  be  better  than  the  prospect,  and 
only  $15,000,000  of  the  $20,000,000  authorized  6  percent 
notes  went  out.  The  company  executed  a  blanket  mortgage 
of  all  its  Michigan  property  through  the  General  Motors 
Company  of  Michigan,  a  corporation  set  up  to  hold  title. 
As  part  consideration  for  the  loan,  $4,169,200  in  General 
Motors  Preferred  stock  and  $2,000,000  worth  of  Common, 
both  at  par,  were  delivered  to  the  bankers.  The  company  re- 
ceived $12,750,000  in  cash  in  return  for  its  notes  and  stock 
given  under  the  loan  contract,  dated  November  n,  1910. 
Preparing  these  documents  and  the  exchanges  necessary 
under  them  required  several  weeks,  but  banker  control  can 

The  Birth  of  General  Motors        129 

be  considered  effective  in  the  interim,   although  the  new 

board  of  directors  did  not  take  office  until  November  I5th. 

On  that  day  the  following  directors  retired  from  office: 

A.  M.  Bentley  of  Owosso 

E.  R.  Campbell  of  Flint  and  New  York,  son-in-law  of 

W.  C.  Durant 

Wm.  M.  Eaton,  also  president 
Harry  G.  Hamilton  of  Pontiac 
C.  R.  Hatheway  of  New  York,  also  secretary  and 


Henry  Henderson  of  Scotch  Plains,  New  Jersey 
Schuyler  B.  Knox  of  New  York 
W.  C.  Leland  of  Detroit 
R.  S.  McLaughlin  of  Oshawa,  Ontario 
W.  J.  Mead  of  Lansing 
John  T.  Smith  of  New  York  City 

Thus  ended,  after  less  than  two  years  of  phenomenal 
growth,  the  first  phase  of  General  Motors  history.  The 
young  giant,  like  so  many  young  giants,  had  overreached 
and  come  to  grief.  Many  thought  General  Motors  would 
never  rise  again.  Saddled  with  what  seemed  at  that  time 
an  unpayable  debt,  and  all  its  property  pledged  as  security, 
there  remained  only  the  intangibles  of  good-will  and  a 
strong  demand  for  cars,  to  give  the  Common  stock  any 
value  whatever.  To  turn  these  factors  to  substantial  ac- 
count was  the  task  of  a  new  management  inexperienced  in 
automobile  manufacturing  and  merchandising,  though  ex- 
pert in  finance  and  well  founded  in  business. 

The  glamor  of  bold  dreams  and  brave  deeds  marked 
the  first  phase :  steady  aim  and  calm  judgment  were  to  mark 
the  second.  General  Motors  paid  a  stiff  price  for  the  life- 
saving  funds  made  available  by  the  bankers.  If  the  latter 
had  retained  until  1929  the  $2,000,000  worth  of  Common 
stock  they  received  in  1910,  its  value  would  then  have  been 
more  than  ninety  times  the  face  value  of  the  loan.  The 
1910  General  Motors  loan  revealed  on  a  large  scale  the 
high  cost  of  financing  automobile  enterprises. 


The  Turning  Wheel 

Viewed  in  retrospect,  the  1910  loan  seems  to  have  been 
unreasonably  costly.  Where  $8,000,000  might  have  pulled 
the  Company  through,  the  latter  had  to  pay  more  than  7 
percent  on  $12,750,000,  the  bonds  having  been  taken  at 
85,  with  the  utmost  security  given  to  the  lenders  under 
mortgage  and  trust  deed  by  a  company  with  substantial 
earnings  and  excellent  prospects.  In  addition,  General 
Motors  had  to  repay  $2,250,000  which  it  never  received, 
and  paid  a  large  bonus  in  stock.  The  transaction  is  hardly 
explainable  except  as  placed  against  a  background  of  ex- 
treme banking  distrust  of  the  automobile  industry  in  general 
and  also  of  driving  personality  behind  the  General  Motors 
expansion  program. 


Chapter   IX 

HE  new  management,  taking  hold  in  the  autumn  of 
1910,  faced  a  complex  task.  It  must  sell  or  liquidate 
subsidiaries  which  seemed  either  hopeless  or  unnecessary  to 
the  corporate  operation  as  a  whole,  set  up  efficient  man- 
agement in  weak  plants  worth  retaining,  command  the 
loyal  cooperation  of  the  labor  and  management  staffs,  and 
integrate  control  over  an  organization  built  up  on  the 
basis  of  decentralization.  When  General  Motors  gave  a 
blanket  mortgage  and  a  trust  deed,  its  position  as  a  hold- 
ing company  was  at  once  invalidated.  Since  it,  and  not  its 
subsidiaries,  owed  the  $15,000,000,  practical  consideration 
enforced  the  exercise  of  more  authority  from  headquarters, 
which  were  temporarily  located  on  Woodward  Avenue, 
Detroit,  across  from  the  Pontchartrain  Hotel,  a  site  now 
occupied  by  the  National  Bank  of  Detroit.  About  the  middle 
of  1911,  the  Company  leased  the  upper  floors  of  the  new 
six-story  Boyer  building  at  the  southwest  corner  of  Brush 
and  Congress  streets,  directly  south  from  the  Wayne 
County  Building. 

The  new  board  consisted  of: 

Anthony  N.  Brady  of  New  York 
Emory  W.  Clark  of  Detroit 
W.  C.  Durant  of  Flint  and  New  York 
A.  H.  Green,  Jr.  of  Detroit 
J.  H.  McClement  of  New  York 
M.  J.  Murphy  of  Detroit 


132  The  Turning  Wheel 

Thomas  Neal  of  Detroit 
James  J.  Storrow  of  Boston 
Albert  Strauss  of  New  York 
Nicholas  L.  Tilney  of  New  York 
James  N.  Wallace  of  New  York 

These  gentlemen  elected  James  J.  Storrow  as  interim 
president  while  making  up  their  minds  as  to  his  successor. 
Mr.  Storrow,  fortunately,  was  a  man  of  great  force  and 
vigor,  and,  in  addition,  he  was  somewhat  automobile- 
minded,  continuing  his  interest  in  motors  until  his  death 
many  years  later.  Under  him  the  work  of  reorganization 
got  away  to  a  swinging  start.  Almost  immediately  it  was 
decided  to  dispose  of  Seager  Engine,  Welch-Detroit,  Mich- 
igan Auto  Parts,  the  National  Motor  Cab  Company,  and 
Ewing.  The  board  acted  with  equal  promptness  to  clarify 
the  financial  structure  by  purchasing  stocks  in  various  other 
General  Motors  enterprises  which  had  accumulated  in 
Buick's  treasury  during  the  hectic  days  when  Mr.  Durant 
was  buying  properties  with  any  funds  available. 

Having  weighed  the  situation,  Messrs.  Storrow  and 
Strauss,  whose  union  of  interests  dominated  the  board  of 
directors,  selected  Mr.  Thomas  Neal  of  Detroit  as  presi- 
dent. Mr.  Neal  was  president  of  the  Acme  Lead  and  Color 
Works,  one  of  Detroit's  successful  industries,  and  had  a 
high  degree  of  business  sagacity.  Standish  Backus,  a  young 
lawyer,  became  secretary  and  James  T.  Shaw,  treasurer. 
It  was  a  distinctly  Detroit  management.  Mr.  Durant  was 
retained  on  the  board  and  given  the  important  post  of  chair- 
man of  the  finance  committee  which  he  held  for  a  year. 

Banker  control  from  the  Atlantic  seaboard  had  its  dis- 
couraging features  for  the  practical  men  who  were  bear- 
ing the  company's  burdens  in  plant  and  field.  Banker 
Strauss  desired  to  move  machinery  from  the  Welch-Detroit 
plant  to  the  Marquette  plant  in  Saginaw  by  water,  having 
discovered  that  both  plants  were  near  the  waterfronts  of 
their  respective  cities.  It  took  a  statistical  report  to  demon- 
strate to  him  that  moving  cargo  from  shop  to  shore  would 
cost  more  than  the  direct  rail  haul  from  one  factory  side- 
track to  another. 

The  Bankers  Take  the  Wheel        133 

For  two  years  expansion  had  been  the  watchword,  with 
efficiency  of  operation  a  minor  consideration.  Inventories 
were  woefully  out  of  balance;  improper  storage  of  supplies 
had  caused  great  waste.  In  one  plant  thousands  of  tires 
were  found  exposed  to  heat  and  sunlight;  in  another  valu- 
able machinery  lay  rusting  out  of  doors.  Tons  of  unsaleable 
merchandise  had  been  built  to  faulty  specifications  or  of 
faulty  materials.  However,  new  managers,  grappling  with 
these  discouragements,  soon  brought  improved  order  and 
spirit  into  plant  operations.  These  readjustments  required, 
of  course,  considerable  time,  and  an  immense  amount  of 


patient,  detail  work  on  the  part  of  plant  managers  and 
their  staffs. 

During  the  two  flush  years  of  General  Motors  life,  man- 
ufacturing, sales,  and  accounting  had  not  kept  pace  with 
growth  of  volume.  The  new  management  accordingly  began 
to  coordinate  policies  and  to  put  into  use  standardized  ac- 
counting and  reporting.  Henceforth,  at  least,  General 
Motors  would  know  how  its  cash  position  stood  from  day 
to  day.  It  set  up  the  General  Motors  Export  Company,  a 
Michigan  corporation  with  $10,000  capital,  to  handle  all 
General  Motors  products  in  the  foreign  field,  this  being 
perhaps  the  first  operation  in  which  General  Motors  pre- 
sented a  completely  united  front.  A  General  Motors  maga- 
zine, the  Insider,  made  its  appearance,  the  first  of  many 
corporation  publications  designed  to  spread  the  General 

134  The  Turning  Wheel 

Motors  message  among  its  own  people  and  advance  the 
solidarity  of  the  enterprise.  An  experimental  and  testing 
laboratory  was  set  up.  New  managers  were  installed  in 
many  plants.  Economy  became  the  watchword,  and  under 
that  banner  began  thorough  reform. 

There  was  plenty  to  be  done.  In  the  mopping-up  process 
the  following  central  office  projects  were  wound  up: 

General  Motors  Securities  Company. 

General  Motors  interest  in  United  Motors  Company 
sold  to  United  States  Motor  Company,  the  rival  hold- 
ing company  organized  by  Benjamin  Briscoe.  A  little 
later  the  Company's  interest  in  United  States  Motor 
Company  was  written  down  to  $i. 

Efforts  to  sell  the  Company's  interest  in  Seager  Engine 
failing,  that  asset  was  also  written  down  to  $i. 

Ditto  with  the  Maxwell-Briscoe  interest. 

These  decisions  took  some  time  to  mature,  but  in  1914, 
by  the  process  of  dissolving  the  subsidiary  corporations, 
General  Motors  finally  rid  itself  of  Randolph,  Peninsular, 
and  Welch-Detroit.  It  sold  the  Reliance  plant  at  Owosso 
to  the  American  Malleables  Company,  and  the  Michigan 
Motor  Castings  Company  was  absorbed  by  Buick. 

Elmore's  capital  stock  was  reduced  from  $60,000  to 
$6,000.  As  the  spare  parts  business  of  both  Elmore  and 
Peninsular  had  been  sold  for  $44,000,  the  Elmore  write- 
off to  $6,000  placed  a  bargain  price  on  the  Clyde,  Ohio, 
plant.  In  five  years  the  value  of  the  Elmore  investment 
had  shrunk  from  $600,000  to  $6,000  in  the  ratio  of  $100 
to  $i,  at  a  time  when  the  automobile  business  was  generally 
prosperous  and  the  Elmore  car  was  considered  thoroughly 
creditable.  Actually,  the  plant  sold  for  $50,000  when  a 
buyer  for  it  appeared  some  years  later. 

It  will  be  noticed  that  in  this  period  of  retrenchment 
General  Motors  concentrated  on  Michigan  producers,  a 
trend  applicable  to  the  entire  industry,  as  it  advanced  in 
age  and  capitalization.  Although  in  later  years  the  Cor- 
poration widened  its  activities  geographically  with  excel- 
lent results,  the  great  automobile  producers  in  its  orbit  still 

The  Bankers  Take  the  Wheel        135 

have  their  chief  plants  and  operating  headquarters  in 

Hopes  being  still  held  out  for  Rainier,  General  Motors 
increased  its  holding  in  the  Saginaw  company  by  $110,000 
of  stock,  paying  about  half  in  cash  and  half  in  surrender 
of  claims.  Full  ownership  of  Rainier  was  completed  on 
May  2Qth.  Another  move  with  enduring  results  was  the 
incorporation  of  General  Motors  Truck  Company  on  July 
22,  1911,  as  a  sales  company  to  handle  the  product  of 
Rapid  Motor  Vehicle  Company  of  Pontiac,  Michigan  and 
Reliance  Motor  Truck  Company. 

The  most  hopeless  task  of  all  remained  in  the  liquidation 
of  the  Heany  assets.  Mr.  Durant,  seeing  the  white  light 
of  truth  where  once  he  had  seen  only  the  rosy  dawn  of 
mythical  profits,  reported  adversely  on  Heany  at  the  meet- 
ing of  May  15,  1911,  and  the  board  resolved  to  grant 
Heany  no  further  advances.  The  Heany  plant  at  York, 
Pennsylvania,  was  of  small  value  compared  with  the 
prospective  value  of  Heany's  patents,  now  seen  to  be  in 
jeopardy  when  carefully  weighed  in  view  of  the  General 
Electric  suit. 

The  Heany  fiasco  cost  General  Motors  enormously, 
estimates  running  from  $5,000,000  to  $12,000,000.  Its 
denouement  marked  the  withdrawal  of  Mr.  Durant  from 
the  chairmanship  of  the  Finance  Committee  on  November 
n,  1911,  when  he  was  succeeded  by  Mr.  Storrow.  Mr. 
Durant,  although  remaining  on  the  board,  was  now  entirely 
divorced  from  the  management  and  devoted  his  energies  to 
founding  Chevrolet,  on  which  he  again  rode  into  power 
four  years  later.  He  remained,  however,  a  director. 

General  Motors  voting  trust  certificates,  the  share  for 
share  equivalent  of  the  deposited  Common  shares,  were 
listed  on  the  New  York  Stock  Exchange  on  July  31,  1911, 
the  first  automobile  securities  listed  by  that  body.  That  list- 
ing meant  that  stockholders  and  the  public  generally  hence- 
forth would  have  clear  statements  of  the  company's  financial 
position  at  regular  intervals,  and  it  therefore  became  part 
of  the  management's  plan  to  rebuild  public  confidence  in 
General  Motors'  structure.  At  this  time  the  net  worth  of 

136  The  Turning  Wheel 

the  company  was  approximately  $35,000,000,  although  the 
authorized  capital  was  $60,000,000. 

The  banker  management,  even  at  that  early  date,  caught 
the  significance  of  the  relationship  of  corporate  financial 
responsibility  to  automobile  sales.  The  automobile  buyer, 
more  definitely  than  the  consumer  in  other  lines  of  mer- 
chandise in  general  use,  seeks  reassurance  of  the  manu- 
facturer's stability,  because  the  service  he  receives  and  the 
resale  value  of  his  car  alike  depend  unmistakably  upon  the 
continuance  of  the  manufacturer  in  business.  General 
Motors'  position  in  this  respect  suffered  a  body  blow  from 
the  uncertainties  reigning  during  the  height  of  the  busy 
selling  season  in  the  midsummer  of  1910,  and  every  effort 
to  reestablish  confidence  was  a  step  toward  better  sales. 
Banking  opinion  had  been  satisfied  at  once  by  the  character 
of  the  new  board,  and  this  confidence  worked  its  way  down 
again  to  the  sales  staffs  and  the  buying  public.  More 
efficient  plant  management  was  steadily  improving  the 
quality  of  the  cars  offered,  and  as  the  feeling  grew  that 
General  Motors  had  escaped  its  Waterloo,  business  im- 
proved. The  tide  turned  faster  than  the  conservative  men 
at  the  center  of  things  fully  realized.  Although  they  were 
paying  off  the  trust  notes  regularly  and  adding  to  surplus, 
General  Motors  stock  was  offered  for  sale  to  several  of 
the  officers  in  1911  with  no  takers.  But  W.  C.  Durant 
watched  the  situation  out  of  the  corner  of  his  eye,  con- 
sidered the  stock  ridiculously  undervalued,  and  as  he  could 
find  the  means,  began  to  buy  back  toward  control. 

One  factor  in  the  upturn  was  the  growth  of  the  export 
business.  The  capital  of  General  Motors  Export  was  in- 
creased in  January,  1912,  from  $10,000  to  $100,000.  An- 
other transaction  of  moment  was  the  purchase  of  the 
remaining  outstanding  shares  of  Weston-Mott  from  C.  S. 
Mott.  This  transaction  which  involved  also  3,000  shares 
of  Brown-Lipe-Chapin  stock  and  several  notes,  totalled 
more  than  $2,000,000.  Brown-Lipe-Chapin,  manufacturing 
gear  differentials  at  Syracuse,  New  York,  later  became  a 
division  of  the  Corporation. 

General  Motors  of  Canada,  a  sales  unit,  was  born  with 
a  capital  of  $10,000  and  General  Motors  completed  its 

The  Bankers  Take  the  Wheel        137 

ownership  of  Cartercar.  Great  things  were  expected  of  Car- 
tercar, a  friction-drive  car.  It  occupied  the  former  site  of  the 
North  and  Hamilton  carriage  factory  in  Pontiac,  and  had 
as  president  George  E.  Daniels,  who  will  be  remembered 
as  the  first  nominal  president  of  General  Motors  Company 
and  later  head  of  Oakland.  But  Cartercar,  in  spite  of  its 
early  promise,  soon  faded  from  view.  The  friction  drive 
simply  could  not  be  popularized,  and  the  chance  for  it  had 
passed  with  the  rapid  improvements  in  gear  shifting. 

Engineering  improvements  came  along  swiftly,  and  Gen- 
eral Motors'  priority  in  some  of  these  hastened  the  recov- 
ery. Buick  introduced  its  first  closed  car — a  limousine — in 
1911.  Other  improvements  were  the  electric  horn,  slip  de- 
tachable rings,  and  the  worm-gear  drive  for  trucks.  But 
the  greatest  mechanical  triumph  of  the  period  was  Cadillac's 
introduction  of  the  Delco  electric  starter,  described  in  the 
Insider  in  1911,  to  become  standard  equipment  in  1912. 
This  epoch-making  achievement  opened  a  new  market  for 
automobiles  by  making  motoring  cleaner,  safer  and  easier, 
and,  in  particular,  met  the  driving  needs  of  women,  result- 
ing in  a  striking  market  advance.1 

The  process  of  shearing  off  disappointing  properties  and 
consolidating  others  continued.  Buick's  Jackson  plant  was 
sold  to  Imperial  Wheel,  and  Michigan  Auto  Parts  went 
to  Northway.  Welch-Detroit,  of  which  the  Company  had 
long  been  weary,  went  to  the  Peninsular  Motor  Company. 
Into  the  Peninsular  shell  had  now  been  poured  three  com- 
panies— Rainier,  Marquette,  and  Welch-Detroit.  It  was  a 
grand  property  physically  but  had  little  luck  until  it  went 
finally  to  Chevrolet. 

The  1911  figures  reveal  the  young  giant  twisting  in  the 
coils  of  bitter  circumstance  but  making  headway.  Net  sales 
were  off  nearly  $7,000,000  and  net  income  cut  to  a  third 
of  1910  profits — only  $3,316,251  was  available  for  divi- 
dends and  reinvestment.  For  a  true  comparison  the  latter 
figure  needs  enlarging  by  one  fifth  as  in  1911  the  close  of 
the  company's  fiscal  year  was  pushed  ahead  to  July  3ist. 
Even  so,  the  shrinkage  was  large.  Nevertheless,  the  Pre- 
ferred dividend  was  paid  promptly,  and  as  the  Common 

'See  Chap.  XIX:  "Research:  the  March  of  the  Open  Mind." 

138  The  Turning  Wheel 

stock  had  never  paid  a  cash  dividend  the  company's  credit 
held  firm.  Pay  rolls  began  to  creep  up,  the  number  of  em- 
ployees advancing  from  an  average  of  10,000  to  11,474. 

Through  this  period  of  reorganization  Buick  had  made 
extraordinary  progress  under  Charles  W.  Nash  and  his 


works  manager,  Walter  P.  Chrysler.  Both  were  extraor- 
dinary men,  self-made,  strong-willed  yet  versatile,  possess- 
ing qualities  of  leadership,  financial  acumen,  and  shrewd 
market  wisdom. 

Charles  W.  Nash  had  risen  from  manual  labor  to  be 
general  superintendent  of  the  Durant-Dort  Carriage  Com- 
pany. In  Flint  they  say  he  began  his  rise  by  mowing  a  lawn 
so  well  that  Mr.  Durant  noticed  his  thoroughness  and  gave 
him  a  steady  job  at  the  factory,  polishing  lamps  at  seventy- 
five  cents  a  day.  If  Durant  had  taken  Mr.  Nash  into  Buick 
with  him  in  1904,  the  whole  history  of  General  Motors 
might  have  been  otherwise,  but  Nash  remained  with 
Durant-Dort.  However,  Durant  recommended  Nash  to 
James  J.  Storrow  for  the  Buick  post  in  1910.  That  Mr. 
Storrow  accepted  this  suggestion  proves  his  openness  of 
mind,  for  Mr.  Nash  lacked  automobile  experience,  and  even 
those  who  knew  and  respected  his  ability  wondered  how  he 

The  Bankers  Take  the  Wheel        139 

would  fare  in  so  novel  an  assignment.  But  if  "Charlie" 
Nash  did  not  know  motor  cars,  he  knew  men  and  he  knew 
factory  organization.  In  a  matter  of  months  after  taking 
hold,  Buick  was  functioning  efficiently,  rolling  up  a  record 
so  outstanding  that  in  November,  1912,  he  was  the 
unanimous  choice  for  the  presidency  of  General  Motors. 

Mr.  Nash  was  fortunate  in  having  Walter  P.  Chrysler 
with  him  during  this  period.  Mr.  Chrysler's  rise  is  one 
which  richly  deserves  all  the  notice  it  has  received,  but  the 
story  is  so  well  known  that  it  need  not  be  repeated  here. 
A  product  of  Western  railroading,  he  was  brought  by  Nash 
to  Buick  from  the  American  Locomotive  Works  at  Pitts- 
burgh. A  genius  at  plant  organization,  he  soon  lifted  that 
burden  from  Mr.  Nash's  shoulders,  and  when  Mr.  Nash 
became  president  of  General  Motors,  Mr.  Chrysler  suc- 
ceeded to  the  chief  responsibility  of  Buick,  there  to  remain 
until  1920. 

In  the  nearly  four  years  of  the  Nash  leadership,  General 
Motors  made  a  remarkable  financial  "comeback."  Good 
earnings  enabled  the  Company  to  anticipate  notes,  add  to 
surplus  and  enlarge  plants.  For  1912  earnings  held  steady, 
but  in  the  next  year  more  than  doubled  on  a  30  percent 
increase  in  sales,  sure  evidence  that  the  reorganized  Gen- 
eral Motors  was  finding  itself  as  an  efficient  manufacturer. 

But  an  even  more  striking  index  of  growing  efficiency  is 
to  be  seen  in  the  ratio  of  net  sales  to  number  of  employees. 
In  1913  each  employee  of  General  Motors  produced  on 
the  average  $4,236  in  net  sales  value;  in  1914,  when  there 
was  a  considerable  drop  in  employment  but  only  a  small 
drop  in  sales,  the  average  was  $6,037. 

From  1913  to  1916  inclusive  General  Motors  earned, 
available  for  dividends,  nearly  $58,000,000,  doubling  its 
profits  each  year  from  1914  to  1916,  as  follows : 

$  7,249,734  in  I9H 
$14,457,803  in  1915 
$28,789,500  in  1916 

While  this  astonishing  earning  power  reflects  the  general 
prosperity  of  the  country  in  the  "munitions  boom,"  following 


The  Turning  Wheel 

the  onset  of  the  World  War  in  Europe,  it  also  reflects  the 
outstandng  fact  that  General  Motors  plants  and  sales 
systems  had  been  thoroughly  reorganized  and  were  ready 
to  go  ahead  with  the  general  improvement  of  business. 


During  these  three  busy  years  net  sales  rose  from  $85,- 
373,303  in  1914  to  $156,900,296  in  1916  and  the  amount 
reinvested  annually  in  the  business  from  $6,201,055  in 
1914  to  $17,010,437  in  1917,  while  the  average  number  of 
employees  rose  from  14,141  to  25,666. 

At  the  beginning  of  this  run  of  luck  and  good  manage- 
ment combined,  the  price  of  the  Common  stock  as  repre- 
sented by  voting  trust  certificates  still  hung  around  $25  a 
share.  Common  stock  began  to  appreciate  in  the  spring  of 
1914,  doubled  in  value  before  the  New  York  Stock  Ex- 
change closed  at  the  opening  of  the  World  War,  and  gained 
persistently  thereafter,  eventually  reaching  a  high  of  $852 
a  share.  When  the  present  Delaware  Corporation  was 
formed  in  1916  it  exchanged  five  shares  of  the  Common 
stock  for  one  share  of  the  Common  stock  of  the  New 
Jersey  Company.  Owing  to  stock  dividends  and  divisions, 

The  Bankers  Take  the  Wheel        141 

each  share  of  the  old  Company  Common  equals  roughly  100 
shares  of  Corporation  Common  and  was  worth  in  Novem- 
ber, 1933,  $3,000.  At  the  peak  price  of  1929  one  share  of 
the  old  Company  Common  was  worth  more  than  $9,000. 

There  was  no  headlong  expansion,  however,  on  the  basis 
of  improvement.  The  only  substantial  capital  increase  in 
1913  was  that  of  General  Motors  Truck  Company  capitali- 
zation from  $10,000  to  $250,000.  Elmore,  Peninsular  and 
Welch  operations  were  wound  up.  With  their  passing  the 
General  Motors  passenger  car  units  had  been  whittled 
down  to  Buick,  Cadillac,  Oakland,  and  Oldsmobile,  and  of 
all  the  truck  units  absorbed  by  General  Motors  in  its  period 
of  great  expansion  only  one  remained:  General  Motors 
Truck  Company. 

General  Motors  had  developed  a  clear  outline  by  the 
time  the  banker  reorganization  was  complete.  It  would 
grow  tremendously,  of  course,  and  add  many  units,  but  they 
would  be  chiefly  accessory  and  parts  companies  supplying 
the  great  automobile  manufacturing  establishments  which 
dealt  directly  with  the  public.  Never  again  would  General 
Motors  give  substantial  evidence  of  a  desire  to  acquire  a 
leadership  in  the  industry  based  merely  upon  buying  com- 
peting companies.  Fear  of  monopoly  aroused  by  swift  early 
expansion  had  been  allayed  and  never  reappeared.  Hence- 
forth General  Motors  would  strive  for  a  larger  share  of  the 
automobile  business  of  the  country,  not  by  buying  up  com- 
petitors, but  by  improving  the  output  of  its  four  great 
producers,  to  which  Chevrolet  would  soon  be  added  as  a 
result  of  an  extraordinary  situation  which  no  policy  could 
foresee.  This  in  the  passenger  car  field;  as  other  opportuni- 
ities  developed,  purchases  of  corporations  in  those  fields 
were  made  and,  of  course,  the  whole  supply  and  service  situ- 
ation has  been  rounded  out. 

The  point  is  that  the  general  plan  of  1913,  which  ultra- 
conservative  men  worked  out  under  the  pressure  of  neces- 
sity, still  stands,  though  still  subject  to  revision  as  circum- 
stances dictate.  General  Motors'  evolution  from  a  holding 
company  to  an  operating  company,  while  not  completed 
for  several  years,  was  begun  under  banker  control,  and  the 
greater  part  of  its  expansion  since  has  been  through  the 

142  The  Turning  Wheel 

growth  of  its  leading  component  divisions  rather  than  by 
purchase  of  rival  companies.  The  country  consequently  no 
longer  thinks  of  General  Motors  as  a  horizontal  trust  cap- 
able of  infinite  expansion  until  it  dominates  the  essential  in- 
dustry of  vehicular  transport,  but  rather  as  an  organization 
with  certain  trust  features  of  advantage  but  still  subject  to 
the  restraints  and  incentives  of  competition. 

As  it  stands,  General  Motors  is  neither  a  vertical  trust 
nor  a  horizontal  trust,  but  in  adapting  itself  to  large  scale 
production  in  a  land  where  competition  is  estimated  the  life 
of  trade,  it  has  taken  on  certain  aspects  of  both  horizontal 
and  vertical  organization,  an  adjustment  dictated  by  the 
necessities  of  cooperation  on  the  one  hand  and  by  a  deter- 
mination to  avoid  even  the  appearance  of  monopolistic  in- 
tent on  the  other. 

For  the  beginnings  of  this  sane  evolution  the  bankers 
who  ruled  General  Motors  from  1910  to  1915  are  re- 
sponsible. How  that  control  passed,  amid  scenes  and  circum- 
stances of  intense  drama,  will  be  told  in  the  two  chapters 
to  follow. 

Chapter   X 




HE  rise  of  Chevrolet  is  one  of  the  epics  of  American 
industry,  with  almost  fairy-tale  aspects.  Like  Cinderella, 
Chevrolet  rose  from  the  ashes,  went  to  court,  was  cheered 
by  the  populace,  married  and  lived  happily  ever  after. 

We  have  seen  that  Buick  began  its  Flint  career  at  the 
western  end  of  Flint  in  the  Flint  Wagon  Works  Plant ;  also 
that  while  new  buildings  rose  in  northern  Flint  to  house 
the  amazing  growth  of  that  company,  only  one  Buick 
structure  stood  in  western  Flint.  Buick  motors  were  still 
being  made  in  this  old  or  No.  2  Plant,  while  across  the 
tracks  Flint  Wagon  Works  engaged  in  turning  out  a  few 
of  the  Whiting  cars.  All  of  these  buildings  have  since  been 
demolished  to  make  way  for  larger  plants  of  Chevrolet. 

In  1909,  Louis  Chevrolet,  bearing  a  name  destined  to 
become  a  household  word  in  America,  was  experimenting 
on  a  small  car  in  Detroit  and  also  with  a  six-cylinder  one. 
He  was  being  financed  by  W.  C.  Durant  who  had  employed 
him  as  a  racing  driver  several  years  before.  Chevrolet  was 
a  picturesque  figure  in  his  racing  days,  as  he  brought  Buicks 
down  the  stretch  with  his  huge  Gallic  mustache  blowing  in 
the  wind.  When  Louis  and  his  brother  Arthur  came  to 
Flint,  Mr.  Durant  tried  them  out  on  a  small  dirt  track 
maintained  by  Buick  in  the  rear  of  its  factory.  Louis  won 
the  contest,  and  was  chagrined  when  Mr.  Durant  immedi- 
ately selected  Arthur  as  his  personal  chauffeur  on  the 
ground  that  Arthur  had  lost  by  taking  no  chances  while 


144  The  Turning  Wheel 

Louis  Chevrolet  had  won  by  taking  all  chances.  Both  Chev- 
rolets  became  members  of  the  famous  Buick  racing  team 
which  contained  Bob  Burman,  Louis  Strang  and  other 
celebrities.  But  Louis  Chevrolet  had  talents  beyond  mere 
speed;  he  had  ideas  about  design.  He  considered  that 
America,  with  improving  roads,  would  receive  favorably 
a  light  car  which,  like  the  French  favorites  of  the  day, 

The  first  Chevrolet,  built  in  April,  1913,  has  traveled  237,462  miles 

combined  beauty  with  modest  price.  This  idea  appealed  to 
Mr.  Durant  who  accordingly  backed  the  Chevrolet  experi- 
ments in  Detroit. 

In  1910,  Mr.  Durant  lost  control  of  General  Motors. 
In  the  retrenchments  which  followed,  Buick  No.  2  Plant 
was  abandoned  and  motor  operations  moved  to  the  north 
end  of  Flint.  Flint  Wagon  Works  had  discontinued  man- 
ufacturing the  Whiting  car,  and  as  the  carriage  business 
showed  a  steady  decline  under  the  competition  of  the  rising 
automobile  trade,  Mr.  Whiting  was  anxious  to  liquidate 
his  company.  The  opportunity  came.  Proving  that  one 
setback  was  not  enough  to  keep  him  out  of  the  automo- 
bile industry,  Mr.  Durant  bought  the  Wagon  Works 
property,  plant  and  contents,  and  organized  the  Little 
Motor  Car  Company  to  occupy  the  property.  The  com- 
pany was  named  for  William  H.  Little  who  had  been 
general  manager  of  Buick  under  Mr.  Durant.  Mr.  Little, 
Charles  M.  Begole,  and  William  S.  Ballenger  signed  the 
articles  of  incorporation  as  of  October  30,  1911.  Capital 

Chevrolet  145 

stock  authorized  was  $1,200,000 — $700,000  Common  and 
$500,000  Preferred.  Stock  subscribed  was  declared  to  be 
$615,600  Common,  and  $207,600  Preferred.  Only  $4,- 
827.42  is  represented  as  paid  in  cash,  the  balance  being 
paid  in  real  estate  and  materials,  inventory,  etc.,  the  value 
of  the  Wagon  Works  plant  being  set  up  at  $350,000.  The 
Preferred  stock  was  paid  in  exchange  for  Wagon  Works 
machinery,  equipment,  and  accounts  and  bills  receivable. 
Little,  therefore,  started  from  scratch,  with  an  old  plant 
full  of  horse-drawn  vehicles  and  mortgaged  to  Mr.  Whiting 
for  $200,000.  When  it  is  recalled  that  Little  became  the 
foundation  of  Chevrolet,  and  Chevrolet  grew  to  larger 
volume  than  any  other  motor  manufacturer  in  the  world, 
industrial  history  has  nothing  to  match  the  march  from 
poverty  to  power. 

Little  Motor  Car  Company  at  first  built  only  one  model, 
a  small  four-cylinder  runabout,  selling  around  $650,  which 
placed  it  in  competition  with  Ford.  It  was  attractively  de- 
signed, but  weakly  powered. 

The  Wagon  Works  plant  was  in  confusion.  The  problem 
facing  the  management  was  selling  a  large  inventory  of 
carriage  parts  and  work  in  process  at  the  same  time  that  it 
rehabilitated  the  property  for  automobile  production.  In 
the  meantime  Louis  Chevrolet  continued  in  Detroit  his  ex- 
perimental work  on  four-  and  six-cylinder  cars,  the  "six" 
being  known  as  Model  C  which  was  finally  accepted  as 
ready  for  production.  A  plant  was  rented  on  West  Grand 
Boulevard,  and  there  the  first  Chevrolet  cars  were  pro- 
duced for  the  market. 

On  November  3,  1911,  the  Chevrolet  Motor  Company 
of  Michigan  was  organized  with  Louis  Chevrolet,  William 
H.  Little  and  Edwin  R.  Campbell  as  incorporators.  Up  to 
that  time,  Chevrolet  had  built  only  four  or  five  experi- 
mental cars,  and  the  new  company's  production  in  Detroit 
was  never  large.  A  sensation  was  created  in  Detroit  real 
estate  circles  when  vacant  property  was  purchased  directly 
across  from  the  Ford  factory  and  a  large  billboard  was 
erected  saying  that  a  complete  modern  plant  would  be 
built  on  that  location.  This  was  never  done,  however,  as  it 
was  soon  seen  that  quantity  production  could  be  more 

146  The  Turning  Wheel 

economically  effected  in  Flint  where  considerable   strides 
had  been  made. 

The  most  important  of  these  was  the  incorporation  of 
the  Mason  Motor  Company  on  July  31,  1911,  with  Arthur 
C.  Mason,  Charles  Byrne  and  Charles  E.  Wetherald  as 
incorporators.  Followed  by  a  large  number  of  former  Buick 

Chevrolet  "Royal  Mail"  roadster,  1914 

employees,  with  amazing  speed  they  began  motor  produc- 
tion in  the  old  Buick  No.  2  Plant  rented  for  the  purpose. 
There,  as  contracted  for,  the  motors  for  both  the  Little  and 
Chevrolet  cars  were  built  by  the  Mason  Motor  Company. 
Mr.  A.  B.  C.  Hardy  succeeded  William  H.  Little  as  gen- 
eral manager  of  the  Little  Motor  Car  Company  at  Flint  on 
January  21,  1912.  Mr.  Hardy  found  the  plant  still  full  of 
everything  for  farm  use  from  wagons  to  whip  sockets. 

The  Little  mortgage  was  very  tightly  drawn.  It  had  to  be 
reduced  in  certain  proportions  as  any  building  or  machinery 
item  was  changed  or  moved,  with  the  Whiting  interests 
consulted  at  each  step.  Mr.  Hardy  says  that  only  $36,500  in 
new  cash  was  put  into  the  Little  Company  of  which  $10,000 
represented  the  claim  which  the  Weston-Mott  Company 
had  against  the  Wagon  Works  for  axles. 

Mr.  Mott's  willingness  to  take  our  stock  was  a  real  help  and  gave 
us  all  courage.  As  part  of  the  deal,  we  were  bound  to  pay  off  all 
debts  of  the  Wagon  Works,  so  the  problem  I  faced  was  that  of 

Chevrolet  147 

turning  a  set  of  old  fashioned  carriage  buildings  into  an  auto- 
mobile plant  on  only  $26,500,  getting  the  rest  of  the  money  out 
of  the  sales  of  horse-drawn  vehicles  and  their  parts.  For  the  first 
year  we  were  in  several  kinds  of  business  at  the  same  time. 

Our  plan  was  simple  to  the  point  of  innocence.  We  took  the 
small  motor,  had  it  revamped  and  improved  by  Mason  and  put  it 
into  a  small  roadster  for  sale  for  $650  which  was  somewhere 
near  Ford's  latest  price.  The  Little  had  good  lines  but  was  under- 
powered. Nevertheless,  we  sold  3,500  Littles  in  my  first  year  and 
also  made  up  and  sold  several  thousand  buggies,  many  thousand 
sets  of  wheels  and  a  raft  of  miscellaneous  carriage  parts  and  ac- 
cessories. All  this  in  addition  to  putting  the  plant  in  fair  shape  for 
the  production  of  automobiles.  We  made  all  of  our  bodies  and 
most  of  our  sheet  metal  parts. 

Mr.  Little  spent  most  of  his  time  in  Detroit  where  Chev- 
rolet was  getting  into  small  production.  Chevrolet  sales 
offices  were  opened  in  Chicago,  Philadelphia  and  Boston, 
these  three  being  the  first  of  many  retail  stores  later 
operated  by  Chevrolet.  Its  large  six-cylinder  car  was  priced 
at  $2,500  and  upwards.  The  capital  for  the  Detroit  opera- 
tion came  largely  from  material  and  parts  suppliers.  The 
plant  in  which  Chevrolet  operated  on  West  Grand  Boule- 
vard in  Detroit  had  been  taken  over  from  Thomas  Cor- 
coran, a  lamp  manufacturer  of  Cincinnati.  For  those  days 
it  was  an  exceptionally  good  plant,  even  luxurious  from  the 
standpoint  of  offices,  and  there  Mr.  Durant  made  his  head- 
quarters for  a  considerable  time. 

The  production  record  hung  up  at  the  Little  plant  in 
Flint,  however,  far  exceeded  what  had  been  done  in  De- 
troit. The  Flint  enterprise  actually  was  making  money, 
while  the  Detroit  operation  was  losing  it.  Consequently, 
Mr.  Durant  planned  a  much  heavier  schedule  for  Flint 
during  1913  based  on  a  production  of  25,000  four-cylinder 
Littles  and  the  introduction  of  a  six-cylinder  Little ;  but  the 
25,000  figure  was  reduced  to  5,000,  and  orders  were  placed 
for  materials  on  that  basis.  A  small  assembly  plant  had 
been  leased  at  the  corner  of  57th  Street  and  nth  Avenue, 
New  York  City,  to  which  parts  were  sent  to  be  assembled. 
The  matter  of  financing  these  shipments  was  disputed 
between  the  Flint  and  Detroit  organizations  which  were 

148  The  Turning  Wheel 

separate  corporations  with  different  sets  of  stockholders. 
Messrs.  C.  M.  Begole  and  W.  S.  Ballenger  of  the  Wagon 
Works  remained  active  in  the  Little  Company,  which  suc- 
ceeded in  paying  off  its  floating  debts,  reducing  its  mortgage 
very  considerably,  and  building  up  a  small  surplus — not 
enough,  however,  to  finance  extensive  shipments  to  New 
York  and  Detroit. 

The  logic  of  the  situation  indicated  the  advisability  of 
concentrating  the  manufacturing  at  Flint.  Consequently, 
the  Chevrolet  Motor  Company  of  Michigan  discontinued 
operation  in  Detroit  and  moved  from  there  in  August, 
1913.  For  a  time  Chevrolet  occupied  the  old  Imperial 
Wheel  Company  plant  on  property  now  owned  by  Buick. 
General  management  of  both  the  Little  and  Chevrolet  com- 
panies was  given  to  A.  B.  C.  Hardy.  All  former  sales 
offices  were  retained.  Mr.  Durant  further  consolidated  his 
Flint  position  by  extending  his  interest  in  the  allied  Mason 
Motor  Company. 

The  year  1914,  which  was  to  inaugurate  the  World  War 
and  witness  the  revival  of  general  business  activities  in  the 
United  States,  found  both  the  Little  and  Chevrolet  cars 
in  production  in  Flint.  Chevrolet  introduced  its  famous 
Baby  Grand  touring  car  and  Royal  Mail  roadster.  The 
organization  had  become  highly  efficient  through  the  neces- 
sity of  making  its  own  way  on  very  little  capital.  The  used 
car  problem  had  not  yet  developed  and  instalment  selling 
was  still  in  the  future.  Chevrolet  could  sell  for  cash  every 
car  it  produced.  So  great  was  the  demand  that  if  a  shipment 
was  not  taken  off  the  railroad  track  promptly  by  the  con- 
signee, someone  else  in  the  community  could  be  depended 
upon  to  lift  it  without  delay.  As  the  money  rolled  in,  Mr. 
Durant  transferred  his  offices  from  Detroit  to  New  York  to 
push  sales  from  that  center  and  also  to  work  out  a  plan 
which  he  had  formed  for  recovering  control  of  General 
Motors.  The  latter  had  snapped  back  into  prosperity  under 
the  Nash  management.  Profits  were  large,  interim  pay- 
ments on  its  funded  debt  were  made  promptly,  and  large 
reserves  accumulated.  Yet,  no  one  of  the  Eastern  bankers 
seemed  to  appreciate  the  full  potential  value  of  General 
Motors  as  thoroughly  as  did  Mr.  Durant. 

Chevrolet  149 

Chevrolet  expansion  went  on  at  top  speed.  During  1915 
the  Little  Motor  Car  Company  discontinued  production. 
Following  an  exchange  of  real  estate,  all  Chevrolet  opera- 
tions were  concentrated  in  the  western  end  of  Flint.  The 
Baby  Grand  touring  and  Royal  Mail  roadster,  volume 
cars  from  the  beginning,  ran  into  large  production. 

The  selling  force  took  decisive  steps  forward.  In  1914 
a  wholesaling  organization  had  been  opened  in  Oakland, 

I        .•          !••  ^ 

Model  490,  Chevrolet — the  basis  of  the  present  Chevrolet 

California.  In  the  following  year  wholesale  offices,  the  first 
of  the  Chevrolet  zones,  were  opened  in  Kansas  City  and 
Atlanta.  Agreements  were  made  with  Russell  Gardner,  Sr., 
for  the  assembling  and  sale  of  the  Model  490  in  St.  Louis 
territory,  and  with  R.  S.  and  G.  W.  McLaughlin  for  similar 
production  and  sale  in  Canada.  Chevrolet  had  no  financial 
investment  in  either  company,  but  had  a  profit-sharing  con- 
tract. Chevrolet  entered  the  Eastern  production  field  with 
the  "490"  by  buying  the  Maxwell  Motor  Company  plant  at 
Tarrytown,  New  York,  the  New  York  City  plant  being  con- 
tinued for  production  of  Baby  Grand  and  Royal  Mail 
models.  Most  of  the  assembly  operations  were  set  up  with 
the  assistance  of  local  capital,  with  the  result  that  the  still 
rather  small  Chevrolet  Company  bloomed  into  a  nation- 
wide operation  in  a  remarkably  short  space  of  time. 

150  The  Turning  Wheel 

Chevrolet  Motor  Company  of  Delaware,  through  which 
W.  C.  Durant  regained  control  of  General  Motors  by  an 
exchange  of  stock,  was  incorporated  in  Delaware  on  Sep- 
tember 23,  1915,  with  a  capital  of  $20,000,000,  raised  to 
$80,000,000  the  following  December.  With  very  broad 
powers,  including  the  right  to  hold,  own,  and  deal  in  securi- 
ties, it  acquired  all  the  stock  of  Chevrolet  Motor  Company 
of  New  York,  Chevrolet  Motor  Company  of  Michigan, 
Chevrolet  Motor  Company  of  Bay  City,  Chevrolet  Motor 
Company  of  Toledo,  Ohio,  Mason  Motor  Company  of 
Flint,  with  contract  interests  in  Chevrolet  Motor  Company 
of  Canada,  Ltd.,  Oshawa,  Ontario,  and  Chevrolet  Motor 
Company  of  St.  Louis. 

The  officers  were  R.  H.  Higgins,  chairman  of  the  board; 
L.  G.  Kaufman,  chairman  of  the  Finance  Committee; 
W.  C.  Durant,  president;  A.  B.  C.  Hardy,  vice-president; 
E.  R.  Campbell,  second  vice-president;  W.  C.  Sills,  treas- 
urer; J.  T.  Smith,  secretary.  Among  the  directors  were 
H.  M.  Barksdale  of  Wilmington,  Delaware,  a  du  Pont 
representative,  and  L.  G.  Kaufman,  president  of  the 
Chatham  Phenix  Bank,  New  York  City.  Mr.  Kaufman  en- 
tered Chevrolet  financial  councils  through  his  ready  accept- 
ance of  Chevrolet  loans  at  the  instance  of  Nathan  Hof- 
heimer  who  had  been  a  large  stockholder  in  the  Heany  en- 
terprises, and  who  followed  Mr.  Durant  into  Chevrolet. 

The  balance  sheet  of  December  31,  1915,  showed  net 
working  capital  of  $7,368,572  and  capital  stock  outstand- 
ing of  $19,752,300,  which  had  been  increased  to  $23,663,- 
800  on  February  29,  1916,  as  a  result  of  the  stock  transfer 
previously  outlined. 

Before  demonstrating  his  control  of  General  Motors 
through  Chevrolet,  Mr.  Durant  offered  a  proposition  to 
have  Chevrolet  taken  into  the  General  Motors  family  as  a 
unit.  That  declined,  a  show  of  strength  was  necessary.  Cin- 
derella Chevrolet  stepped  forth  in  her  new-won  splendor 
to  the  applause  of  the  multitude. 

Chevrolet  Motor  Company  of  Michigan  took  over  the 
capital  stock  of  the  Mason  Motor  Company.  The  year 
1916  saw  Chevrolet  still  expanding.  A  new  assembly  plant 
was  built  at  Flint  and  another  started  at  Fort  Worth,  Texas. 

Chevrolet  151 

The  Mason  Motor  Company  increased  its  motor  manufac- 
turing space  at  Flint.  A  new  axle  plant  was  also  added.  Two 
notable  purchases  had  been  made  of  properties  which 
greatly  enlarged  Chevrolet's  manufacturing  resources.  The 
National  Cycle  Company  and  the  National  Motor  Truck 
Company  at  Bay  City,  Michigan,  were  purchased  for  small 
parts  production  and  Warner  Gear  Company  at  Toledo, 
Ohio,  for  transmission  and  gear  production.  Retail  stores 
were  opened  in  many  cities.  Chevrolet  assembly  began  at 
Oakland,  California.  A  profit  of  $278,000  was  derived 
from  sale  to  the  Ford  Motor  Company  of  Highland  Park 
property  bought  five  years  before.  Additions  to  the  manu- 
facturing, assembling,  and  sales  facilities  came  fully  in  use 
in  1917  and  made  that  year  notable  in  spite  of  the  difficul- 
ties which  manufacturing  in  general  encountered  through 
the  participation  of  the  United  States  in  the  World  War 
and  the  setting  up  of  quotas  on  materials. 

Chevrolet  leased  an  eight-story  office  building  at  224 
West  57th  Street  (1764  Broadway),  New  York  City,  and 
moved  the  executive  offices  to  that  location  on  December  I, 
1917,  later  exercising  an  option  to  purchase.  In  preparation 
for  its  absorption  into  the  General  Motors  Company, 
Chevrolet  in  1918  began  to  buy  the  outstanding  stocks 
held  locally  in  its  enterprises  in  various  sections  of  the 
country,  and  their  several  production  and  sales  agreements 
were  cancelled  out  in  this  way  at  figures  highly  profitable 
to  the  local  investor.  In  1918  General  Motors  purchased 
all  the  assets  and  assumed  all  the  liabilities  of  Chevrolet 
Motor  Company  (Delaware).1 

In  all  American  industrial  history  there  has  never  been 
anything  to  equal  the  rise  of  Chevrolet  from  an  experiment 
in  1910-11  to  the  position  it  held  when  merged  with  the 
General  Motors  Corporation  in  1918.  It  had  made  $6,000,- 
ooo  in  six  years  and  had  amazed  the  automobile  world  by 
securing  control  of  General  Motors  Company  of  New 
Jersey.  Moreover,  it  had  worked  out  a  broadly  based  sys- 
stem  of  production  and  nation-wide  assembly  upon  which 
it  could  build  its  quantity  leadership  of  the  future.  Starting 
with  almost  no  cash  and  an  antiquated  plant,  Chevrolet's 

^or  later  history  of  Chevrolet,  see  Chap.  XVI. 


The  Turning  Wheel 

swift  and  dazzling  ascent  to  profit  and  power  caught  the 
attention  of  the  country.  How  Cinderella  Chevrolet  came 
to  the  court  of  public  opinion  unheralded  and  unsung,  to 
ride  away  in  her  coach-and-six  to  the  cheers  of  the  popu- 
lace, will  be  told  in  the  following  chapter. 

Chapter   XI 


N  ITS  lusty  youth  the  automobile  industry  displayed 
strong  resistance  to  the  down  swings  of  the  business  cycle. 
When  banks  were  failing  in  1907,  and  many  sections  had 
only  scrip  for  a  circulating  medium,  the  automobile  cities 
of  Michigan  hardly  knew  that  distress  was  stalking  the 
land.  Pessimists  were  always  talking  of  the  "saturation 
point"  but  conveniently  it  kept  receding. 

Business  in  general  began  to  slow  down  in  1913,  but 
General  Motors'  reorganization  had  given  the  Company 
such  momentum  that  its  earnings  kept  rising.  Likewise, 
Chevrolet  passed  swiftly  through  infancy  into  assured 
earning  power.  The  situation  had  all  the  elements  of  drama ; 
indeed,  one  could  be  sure  of  drama  wherever  William  C. 
Durant  concentrated  his  attention.  On  the  one  hand  stood 
the  organizer  of  General  Motors,  bereft  of  power  in  his 
old  enterprise,  but  already  in  the  field  with  a  new,  expanding 
venture,  built  on  a  "shoe  string"  in  the  sense  of  capital 
structure  but  paying  its  way,  growing  through  earnings,  the 
bright  faith  of  its  captain  and  his  uncanny  ability  to  find 
capital  when  it  was  needed.  On  the  other  hand  stood  Gen- 
eral Motors,  directed  by  more  conservative  men,  with  the 
power  of  ultimate  decision  resting  in  bankers  more  inter- 
ested in  getting  the  Company  out  of  debt  than  in  taking 
unnecessary  risks. 

Sometimes  the  conservative  view  is  really  the  short  view, 
the  optimistic,  the  long  view.  It  proved  to  be  so  in  this 


154  The  Turning  Wheel 

case.  With  their  eyes  on  the  ledgers  rather  than  on  the 
future,  the  bankers  never  quite  comprehended  the  potential 
value  of  General  Motors.  Having  mopped  up  the  debris  of 
the  initial  expansion  they  failed  to  grasp  the  importance  of 
what  remained  in  General  Motors  after  the  house-cleaning 
had  been  done.  Few  realized  that  General  Motors'  earning 
capacity  far  outran  its  debt  commitments,  and  among  those 
few  was  the  man  who  had  founded  the  company.  W.  C. 
Durant  began  buying  General  Motors. 

In  his  market  campaign  for  control  from  1913  to  1915, 
Mr.  Durant  proceeded  from  the  firm  base  of  a  large 
personal  interest  in  the  stock.  He  had  sold  none  of  his 
original  holdings.  Members  of  his  family  held  large  blocks. 
Other  blocks  were  held  by  old  friends  and  business  asso- 
ciates who  had  clung  to  their  holdings  through  the  period 
of  falling  prices  for  the  stock.  Mr.  Durant's  liberality  in 
buying  companies  for  stock  had  endeared  him  to  bene- 
ficiaries upon  whose  loyalty  he  could  rely. 

Altogether  there  was,  both  in  property  and  sentiment, 
the  basis  for  considerable  buying,  credit  being  comparatively 
easy.  General  Motors  certificates  trebled  in  price  by  the 
time  the  New  York  Stock  Exchange  closed  at  the  outbreak 
of  the  World  War  and,  when  the  Exchange  opened  four 
and  a  half  months  later,  General  Motors  was  one  of  the 
few  stocks  to  have  appreciated  in  the  interval.  Thereafter 
the  stock  rose  in  value  rapidly  as  the  munitions  boom  gath- 
ered headway.  The  World  War  played  into  Durant's  hands 
by  bringing  new  money  and  new  men  into  the  stock  market, 
and  by  stimulating  confidence  in  business.  While  it  was  gen- 
erally understood  that  Durant  was  buying,  the  Street  was 
skeptical  how  far  he  could  go,  and  the  bankers  in  control 
never  seemed  to  have  read  the  danger  signals.  Their  re- 
sources, of  course,  far  outweighed  those  of  the  opposition,  if 
they  had  ever  been  mobilized  for  resistance. 

General  Motors  in  1915  was  a  rich  prize.  The  statement 
of  July  3  ist,  of  that  year,  shows  net  working  capital  of 
$31,141,238,  cash  of  $15,527,124,  and  net  profits  for  the 
year  of  nearly  $15,000,000.  Only  $2,328,000  of  the 
$15,000,000  gold  notes  issued  in  1910  remained  unpaid, 

The  Corporation  Established         155 

the  mortgage  debt  having  been  reduced  by  approximately 
$1,000,000  in  the  fiscal  year  ending  July  31,  1911 ;  $1,500,- 
ooo  in  1912;  $1,500,000  in  1913;  $3,000,000  in  1914;  and 
$5,500,000  in  1915.  By  comparison  Chevrolet  was  still  a 
pigmy  yet  plans  were  afoot  to  have  little  Chevrolet  gain 
control  of  the  General  Motors  giant. 

This,  of  course,  had  to  be  done  carefully.  The  campaign 
was  cleverly  timed,  and  had  support  from  sources  highly  re- 
spectable. Mr.  Durant  received  substantial  banking  aid 
from  Louis  G.  Kaufman  of  the  Chatham  Phenix  Bank, 
New  York.  The  open  market  was  buying  on  a  tremendous 
scale,  as  is  evident  from  the  high  and  low  prices  for  the 
General  Motors  voting  trust  certificates  representing  Com- 
mon stock.  The  range  of  prices  was : 

Year  High  Low 

I9H  5iM  35 

1912  42%  30 

1913  40  25 

Then  the  spread  began,  with  a  1914  low  of  37 }i  and  a 
high  of  99.  Buying  for  control  took  the  stock  in  1915  from 
a  low  of  82  to  a  high  of  558.  But  unlike  so  many  other 
market  movements,  victory  was  followed  by  only  a  slight 
recession  and  the  scoring  of  a  new  high  figure — low  for 
1916,  405;  high,  850.  No  matter  how  rapidly  Mr.  Durant 
and  his  friends  "bulled"  the  market  General  Motors  stock 
remained  worth  what  they  paid  for  it.  But,  in  all  prob- 
ability, no  market  campaign  which  was  nothing  more  than 
speculative  would  have  resulted  in  the  recapture  of  General 
Motors  control  by  its  founder. 

As  part  of  the  plan  Chevrolet  Motor  Company  of  Dela- 
ware was  organized  for  $20,000,000,  but  the  papers  were 
not  filed  until  September  23,  1915.  Chevrolet  of  Delaware 
was  the  horse  Durant  rode  to  battle.  The  word  went  out, 
quietly,  that  Chevrolet  would  be  traded  for  General  Motors 
at  the  ratio  of  five  to  one,1  and  those  who  had  followed 

aThe  offer  held  until  January  25,  1916,  when  a  change  was  made  by  which 
four  shares  of  Chevrolet  Common  stock  instead  of  five  were  exchanged  for 
one  share  of  General  Motors  Company  of  New  Jersey  Common  stock. 

156  The  Turning  Wheel 

Durant  by  investing  early  in  Buick  and  General  Motors 
began  to  send  in  or  bring  in  their  stock  for  transfer. 
Mr.  Hardy  relates  how  A.  M.  Bentley  of  Owosso  brought 
in  a  large  brief-case  of  General  Motors  certificates  to  the 
Chevrolet  headquarters  in  New  York  and  was  willing  to 
turn  them  in  without  even  a  receipt.  Reliance  had  gone  the 
way  of  many  other  promotions,  but  Mr.  Bentley  still  had 
the  General  Motors  stock  with  which  it  had  been  purchased. 
The  close  friendly  relations  Mr.  Durant  had  established 
with  the  old  stockholders,  to  many  of  whom  he  had  sold 
stock  personally,  stood  him  in  good  stead  now.  With  the 
value  of  their  holdings  increasing  daily  under  his  market 
generalship,  with  both  Chevrolet  and  themselves  rising 
richer  each  morning,  they  forgot  the  long  wait  for  dividends 
and  the  temporary  embarrassment  of  the  company  now 
happily  cured. 

In  the  final  check-up,  to  be  absolutely  certain,  Mr.  Durant 
was  himself  one  of  four  men  who  passed  the  certificates 
from  hand  to  hand,  each  one  calling  out  the  names,  numbers 
and  holdings.  So  fortified,  the  certificates  being  brought  in 
in  baskets,  Mr.  Durant  entered  the  stockholders1  meeting 
of  September  16,  1915 — on  the  seventh  anniversary  of  in- 
corporation— absolute  master  of  the  situation.  A  dividend 
of  $50  a  share  on  the  Common  stock  was  declared  by  the 
directors  payable  October  I5th,  one  of  the  most  substantial 
ever  paid  by  a  large  American  corporation.  This  dividend 
had  been  earned  under  the  old  management,  and  the  in- 
tention had  been  to  declare  a  generous  distribution,  but  out 
of  deference  to  the  coming  of  the  new  management  action 
on  it  had  not  been  taken. 

The  advantages  of  this  disbursement  for  the  victors  were 
obvious,  when  the  circumstances  of  the  stock  accumulation 
are  recalled.  General  Motors  Common  had  never  paid  a 
cash  dividend,  though  Preferred  dividends  had  been  fully 
maintained.  To  the  original  stockholders  Common  had  gone 
as  a  bonus,  but  many  of  them  had  bought  more  Common 
in  the  course  of  the  campaign  for  control  and  others, 
through  the  years  of  adversity,  had  sacrificed  Preferred  to 
cling  to  Common  with  a  stubborn  faith  in  the  Company's 

The  Corporation  Established         157 

earning  power.  Also,  the  expense  of  the  campaign  had  been 
considerable,  especially  for  brokerage  on  Street  trans- 
actions. Heavy  borrowings  had  gone  into  the  stock,  and 
bankers  behind  Durant  breathed  easier.  As  the  Chevrolet 
treasury  would  receive  a  huge  sum,  and  part  of  it  would 
stay  there,  Chevrolet  changed  instantly  from  an  adventure 
to  a  made  property. 

Before  maturing  this  coup,  Mr.  Durant  is  said  to  have 
proposed  that  Chevrolet  be  taken  as  a  unit  into  the  General 
Motors  family,  but  this  was  declined.  Whereupon  the  trap 
was  sprung. 

Described  as  the  coolest  man  in  the  room  during  this 
momentous  meeting,  Mr.  Durant  continued  to  wear  the 
velvet  glove  over  the  iron  hand  for  some  time.  On  Novem- 
ber 1 6th  the  following  directors  were  elected,  representing 
the  du  Pont  interests :  F.  L.  Belin,  Pierre  S.  du  Pont, 
J.  Amory  Haskell,  and  John  J.  Raskob.  Among  other  new 
directors  were  Arthur  G.  Bishop,  president  of  the  Gene- 
see  County  Savings  Bank  at  Flint,  and  Louis  G.  Kaufman. 
The  new  board  contained  strong  financial  representation. 

Messrs.  Strauss  and  Storrow,  perhaps  seeing  the  hand- 
writing on  the  wall,  had  retired  from  the  board  in  the  pre- 
ceding June.  They  were  now  joined  in  retirement  by  Joseph 
Boyer  of  Detroit,  president  of  Burroughs  Adding  Machine 
Company,  Robert  Herrick,  Edwin  D.  Metcalf,  Nicholas 
L.  Tilney,  and  Jacob  Wertheim.  Several  survivors  of  the 
old  bankers'  directorate  lingered  on,  trying  to  resolve  in 
their  minds  the  future  of  this  dramatic  union  of  Chevrolet 
and  General  Motors,  which  to  many  had  all  the  earmarks 
of  a  corporate  mesalliance,  since  a  small,  new  company  had 
gained  control  of  a  larger  and  older  one,  an  industrial  and 
financial  giant  of  the  first  magnitude. 

Pierre  S.  du  Pont  was  elected  chairman  of  the  board,  a 
position  he  held  for  over  thirteen  years,  from  Novem- 
ber 16,  1915,  to  February  7,  1929.  Mr.  L.  G.  Kaufman  took 
Mr.  Storrow's  place  as  chairman  of  the  Finance  Committee. 
The  Central  Trust  Company  of  New  York  was  directed 
to  cremate  "all  of  the  6  percent  first  lien  five-year  sinking 

158  The  Turning  Wheel 

fund  notes  as  are  hereafter  received,"  the  full  amount  nec- 
essary to  meet  the  last  of  these  having  been  deposited  in 
advance  of  their  maturity  on  October  i,  1915. 

All  wondered  what  Mr.  Durant  had  in  mind  when  he  did 
not  take  the  presidency  immediately.  Probably  his  hesita- 


tion  in  that  regard  flowed  from  two  sources:  his  admira- 
tion for  Mr.  Nash  both  as  a  man  and  an  executive,  and  a 
desire,  noticeable  from  the  birth  of  General  Motors,  to 
remain  in  the  corporate  background  and  work  through 
others.  During  the  interval  in  which  control  of  General 
Motors  remained  vested  in  Chevrolet,  this  matter  of  the 
presidency  remained  in  abeyance,  but  eventually  it  had  to  be 
faced,  and  on  June  i,  1916,  Mr.  Nash  resigned  and 
Mr.  Durant  succeeded  him. 

It  is  said  by  men  close  to  the  situation,  that  Mr.  Durant 
saw  Mr.  Nash  go  with  regret  and  that  he  himself  had  to 
be  urged  to  accept  the  presidency.  There  can  be  no  doubt  of 
the  first.  The  two  men  had  worked  together  for  many  years 
in  the  Durant-Dort  Carriage  Company.  The  Nash  record 
in  the  presidency  was  a  really  superb  achievement,  so  note- 
worthy as  to  recommend  him.  to  instant  backing  in  an  in- 
dependent venture.  But  in  the  process  of  making  that  record 
Mr.  Nash  had  grown  to  a  point  where  the  prospect  of  sub- 
ordinating himself,  even  in  the  most  silken  of  controls, 
could  hardly  be  attractive.  Also  as  an  intensely  practical 
man  who  had  labored  tremendously  to  correct  industrial  ills 

The  Corporation  Established         159 

due  to  unrestrained  optimism,  he  dreaded  seeing  optimism 
in  the  saddle  again.  Perhaps,  too,  he  was  a  little  chagrined 
at  the  ease  with  which  Mr.  Durant  had  overcome  the  man- 
agement in  the  recapture.  Though  urged  to  stay,  Mr.  Nash 
went  his  way  to  new  success. 

Other  members  of  the  old  board  waited,  in  the  expecta- 
tion that  the  Durant-du  Pont  alliance  would  not  hold. 
There  was  at  least  this  ground  for  that  expectation:  the 
du  Pont  directors,  schooled  in  a  big  business  of  ancient 
origin  and  close  relations  with  government,  held  steadfastly 
to  certain  high  conceptions  of  corporate  responsibility  to 
stockholders  and  public.  They  were  descendants  of  an 
elder  American  industrialism,  and  while  intensely  alert  in 
technology  and  finance,  they  had  never  taken  their  projects 
to  the  public  as  promotions.  The  birth  pangs  of  General 
Motors,  as  presided  over  by  Mr.  Durant  from  1908  to 
1910,  would  have  seemed  almost  incomprehensible  to  them 
if  they  had  been  watching  closely  that  dynamic  scattering 
of  stock  and  accumulation  of  properties.  Now  that  they 
were  associated  with  the  most  daring  promoter  of  the  age, 
the  question  arose  how  long  that  association  could  last. 
Rather  studied  attempts  were  made  to  divide  the  two 
camps,  but  these  came  to  nothing.  The  du  Pont  interests  in 
General  Motors  grew  until  it  became  roughly  equal  to  that 
of  Mr.  Durant  and  resulted  in  a  sharing  of  control.  In  1918, 
through  direct  or  indirect  ownership,  the  du  Pont  holdings 
were  approximately  28  percent  of  the  outstanding  Common 
stock  of  the  Corporation. 

The  reasons  behind  the  du  Pont  entry  into  General 
Motors  are  part  of  a  most  remarkable  chapter  in  Ameri- 
can industrialism.  For  generations  this  gifted  family,  of 
aristocratic  French  descent,  had  been  manufacturing  powder 
and  other  explosives  at  Wilmington,  Delaware,  their  plant 
becoming  the  chief  reliance  of  the  government  in  every 
American  war  from  that  of  1812  onward.  Although  de- 
veloping explosives  for  peace-time  pursuits  as  well,  each 
war  found  the  du  Pont  plants  expanding  at  a  rate  which 
rendered  their  full-time  use  in  peace  something  of  a  prob- 
lem. Consequently,  from  the  base  of  explosives,  the  du  Ponts 
gradually  widened  their  activities  in  the  direction  of  general 

160  The  Turning  Wheel 

industrial  chemistry,  building  up  research  staff  organiza- 
tions which  were  ever  peering  into  the  future  for  new  things 
to  manufacture. 

In  the  peaceful  years  before  the  World  War,  there  were 
several  forces  at  work  to  limit  the  powder  business.  The 
frontier  had  vanished  under  the  steady  march  of  popula- 
tion, with  an  accompanying  decline  in  hunting.  While  the 
use  of  explosives  was  growing  in  agriculture  and  engineer- 
ing, du  Pont  had  to  divide  that  trade  with  several  strong 
competitors.  The  feeling  grew  that  the  future  of  its  busi- 
ness depended  upon  cultivating  close  relations  with  indus- 
tries using  chemical  products,  and  preferably  with  the 
industry  likely  to  grow  both  in  proportions  and  in  its  in- 
creasing use  of  chemical  products.  The  automobile  filled 
these  specifications.  It  is  probable  that  the  du  Fonts  would 
have  entered  the  automobile  business  in  some  significant 
way  even  if  there  had  been  no  World  War. 

The  war,  of  course,  tremendously  accelerated  this  trend. 
Almost  from  the  first  clash  of  arms  in  Europe,  orders  for 
powder  and  other  explosives  poured  into  the  E.  I.  du  Pont 
de  Nemours  Company.  As  the  war  continued,  the  volume 
of  these  orders  kept  increasing,  and  Allied  needs  were  so 
urgent  that  du  Pont  expanded  its  facilities  on  a  large  scale 
in  order  to  meet  them.  Large  profits  resulted  as  a  matter  of 
course,  but  always  this  question  arose  as  the  highly  con- 
servative du  Pont  organization  considered  the  future: 
What  is  to  be  done  with  all  these  plants,  all  these  work- 
men when  peace  is  declared?  The  du  Ponts  knew,  better 
than  most,  that  wars  have  a  way  of  ending  suddenly,  and 
also  that  at  the  close  there  follows  a  sharp  strain  in  read- 
justing a  great  industry  to  the  requirements  of  peace. 
Moreover,  the  du  Pont  philosophy  of  employment  takes 
account  of  the  difficulties  suffered  by  staff  and  labor 
through  a  forced  change  of  scene  and  occupation.  There- 
fore, they  decided  to  make  an  investment  in  the  automobile 
business,  taking,  as  already  related,  the  successful  flyer  with 
Mr.  Durant  on  Chevrolet  during  his  drive  for  General 
Motors  control,  with  immediate  recognition  in  the  direc- 
torate. Subsequent  analysis  revealed  a  firm  basis  for  fur- 
ther investment  of  surplus  earnings.  The  du  Ponts  also 

The  Corporation  Established         161 

had  products  to  supply;  still  growing,  the  automobile  trade 
was  distinctly  a  peace-time  business,  and  the  phenomenal 
increase  in  closed  cars  indicated  an  expanding  market  for 
paint,  varnishes,  artificial  leathers  and  other  du  Pont 
products,  either  then  available  or  in  prospect. 

The  alliance  had  equal  advantage  for  Mr.  Durant.  His 
brilliant  double-barrelled  success,  first  with  General  Motors 
and  then  with  Chevrolet,  had  commended  him  to  everyone 
save  the  country's  most  influential  bankers.  With  them  he 
still  needed  conservative  sponsoring,  not  from  any  sus- 
picion of  his  intentions,  but  because  he  was  thought  of  as 
an  optimist  easily  carried  away  from  a  solid  footing  by  the 
undertow  of  dreams.  The  conservative  banker-control  of 
General  Motors  having  passed  in  the  heat  of  battle,  the 
financial  world  was  comforted  at  seeing  the  steady  and  de- 
pendable du  Pont  interests  well  to  the  fore  when  the  change 
came.  Their  presence  insured  that  stability  would  have  a 
strong  voice  at  the  council  table. 

In  particular  the  du  Pont  connection  gave  reassurance  to 
the  financial  community  that  General  Motors  would  con- 
tinue, even  though  its  control  had  been  secured  by  Chev- 
rolet. The  relation  of  the  two  companies  for  the  future 
puzzled  Wall  Street  greatly  for  a  time.  Jonah  having  swal- 
lowed the  whale  in  perhaps  the  most  startling  reversal  of 
form  ever  witnessed  on  the  Stock  Exchange,  it  was  now 
apparent  that  getting  the  General  Motors  whale  into  the 
open  again  was  a  matter  of  importance  to  investors. 

Effecting  this  transformation  took  some  time,  as  it  in- 
volved nothing  less  than  the  dissolution  of  the  General 
Motors  Company  of  New  Jersey.  The  last  year  of  the  old 
company's  existence  saw  its  Common  stock  on  a  regular 
quarterly  dividend  basis,  with  the  first  dividend  declared 
January  5,  1916. 

The  same  meeting  began  to  clear  the  decks  with  the  sale 
of  the  old  Elmore  property  at  Clyde,  Ohio,  for  $50,000,  as 
heretofore  mentioned,  and  the  dissolution  of  General 
Motors  of  Michigan,  organized  in  1910  to  hold  the  com- 
pany's real  estate  for  the  benefit  of  the  trust  mortgage.  The 
Imperial  Wheel  Company's  plant,  next  to  Buick,  was  bought 

162  The  Turning  Wheel 

for  $80,000  plus  certain  Detroit  real  estate,  a  transaction 
which  completed  Buick's  holding  on  Hamilton  Avenue,  the 
"front  street"  of  its  vast  plant  at  Flint. 

After  the  resignation  of  President  Nash  had  been 
accepted  with  regrets,  Mr.  Durant  became  president  on 
June  i,  1916.  He  would  have  preferred  remaining  in  the 
background  as  he  had  done  before  and  letting  someone  else 
have  the  place  of  honor.  There  were  special  reasons  why 
Mr.  Durant  did  not  wish  to  burden  himself  with  the  presi- 
dency. He  disliked  being  tied  down  to  one  duty,  and 
scarcely  had  he  carried  the  General  Motors  battlements 
than  he  began  assembling  various  accessory  and  parts  com- 
panies into  United  Motors  Corporation — incorporated 
May  n,  1916,  although  negotiations  for  some  of  the 
properties  had  been  begun  the  preceding  year. 

Other  fields  tempted  him  in  this  exuberant  period  when 
fortune  and  prestige  rode  high  on  the  wings  of  success. 
Farm  transport,  tractors,  and  all  sorts  of  mechanized  farm 
implements — these  took  hold  of  his  imagination.  Also 
gasoline-driven  highway  construction  machinery — some- 
thing might  be  done  there.  From  his  first  entry  into  the 
automobile  world,  Mr.  Durant  naturally  took  a  keen  in- 
terest in  pushing  good  roads.  It  was  he  who  started  state 
Senator  H.  S.  Earle,  "Good  Roads"  Earle,  on  his  career  of 
highway  propaganda  which  made  his  name  almost  a  house- 
hold word  through  the  Middle  West  and  left  enduring 
monuments  in  magnificent  highways.  When  Mr.  Durant's 
attention  riveted  itself  on  a  general  idea,  he  seemed  to 
leap  around  all  its  various  facets  and  discover  something 
practical  to  do  about  each  of  them.  Perhaps  his  very  un- 
willingness to  assume  detail  executive  responsibility  came 
from  a  correct  reading  of  his  own  nature;  he  may  have 
seen  himself  then,  as  others  have  since,  as  one  whose  out- 
standing talent  was  the  gift  of  seeing  opportunities  and 
starting  projects  which,  once  begun,  could  safely  be  left  to 
others.  One  can  perceive  in  him  a  creative  spirit  which  would 
fret  itself  against  the  chains  of  prudence  and  tradition, 
building  on  a  vast  scale  gigantic  projects  which  he  had 
difficulty  in  managing  after  they  were  built.  Probably  he 
would  have  preferred  going  on  making  mergers  to  being 

The  Corporation  Established         163 

president,  but  the  weight  of  advice  and  his  just  pride  in  his 
accomplishment  overcame  his  dislike  for  routine  executive 

At  the  close  of  its  last  fiscal  year,  July  31,  1916,  the 
General  Motors  Company  of  New  Jersey  owned  the  entire 
capital  stock  of: 

Buick  Motor  Company,  Flint,  Michigan 

Cadillac  Motor  Car  Company,  Detroit,  Michigan 

General  Motors  Company  of  Michigan 

General  Motors  Export  Company 

General  Motors  Truck  Company,  Pontiac,  Michigan 

Jackson-Church- Wilcox  Company 

Northway  Motor  &  Manufacturing  Company,  Detroit, 


Oakland  Motor  Car  Company,  Pontiac,  Michigan 
Olds  Motor  Works,  Lansing,  Michigan 
Weston-Mott  Company,  Flint,  Michigan 

In  addition  it  owned  62.5  percent  of  the  capital  stock  of 
Champion  Ignition  Company  of  Flint  and  49.85  percent  of 
the  McLaughlin  Motor  Car  Co.,  Ltd.,  of  Oshawa,  Ontario. 

The  estimated  production  capacity  of  its  automobile 
plants  was  given  as : 

Buick 100,000 

Cadillac 20,000 

General  Motors  Truck 6,OOO 

Oakland    30,000 

Oldsmobile    15,000 

The  significant  items,  as  a  result  of  the  year's  operations, 
were  as  follows : 

Cash  and  Cash  Investment.  .$22,762,574.86 

Net  Profits   28,812,287.96 

Net  Working  Capital 43,664,671.40 

Dividends  Paid 1 1,779,122.99 

Paid  on  Debt  Reduction 2,328,000.00 

On  October  13,  1916,  General  Motors  Corporation  was 
incorporated  in  Delaware  to  acquire  all  the  stock  of  Gen- 
eral Motors  Company  of  New  Jersey,  a  basis  of  exchange 

164  The  Turning  Wheel 

being  established  at  one  and  one  third  shares  of  new  Pre- 
ferred for  one  share  of  the  old  Preferred  and  five  shares  of 
the  new  Common  for  one  share  of  the  old  Common  stock. 
The  new  corporation's  capital  structure  on  October  31, 
1917,  consisted  of: 
Preferred  stock:  6  percent  cumulative  $100  par,  $20,- 

000,000  authorized,  $19,674,800  issued. 
Common    stock:    $100    par,    $82,600,000    authorized, 
$82,558,800  issued,  of  which  $4,685,500  was  in  the 
Corporation's  treasury. 

The  outstanding  stocks,  plus  their  proportion  of  sur- 
plus, in  affiliates  and  subsidiaries  now  owned  by  the 
Corporation,  totaled  $1,380,430.73. 
There  was  no  funded  debt. 

John  J.  Raskob  became  a  member  of  the  Finance  Com- 
mittee on  November  2ist,  and  a  little  later  its  chairman,  in 
which  position  he  exercised  a  potent  influence  for  the  next 
ten  years.  A  man  of  keen  vision,  it  is  said  that  he  took  the 
lead  in  interesting  the  du  Ponts  in  General  Motors  and 
many  of  the  far-sighted  plans  in  the  next  expansion  era  of 
General  Motors  may  be  traced  to  his  initiative.  Once  more 
General  Motors  began  to  lop  off  properties,  as  in  1910,  but 
there  was  a  vast  difference  in  the  point  of  view  of  the  organ- 
izers in  the  two  periods.  In  1910  all  had  been  skepticism 
regarding  the  future  of  both  the  Company  and  the  industry, 
and  at  that  time  the  motive  was  chiefly  economy  with  a 
view  to  debt  payments.  Now  the  Corporation,  free  and 
clear  of  funded  debt,  was  in  the  hands  of  hopeful  and  san- 
guine men,  ready  to  expand  their  business  to  match  the 
leaping  trade  of  a  country  grown  so  prosperous  that  not 
even  the  epochal  political  campaign  of  1916  could  reduce 
automobile  sales  materially.  They  were  clearing  the  decks 
in  order  to  take  on  more  cargo,  razing  old  structures  to 
make  way  for  new  and  larger  ones. 

The  Cartercar  plant  at  Pontiac  was  sold  for  $35,000,  a 
fraction  of  the  sum  paid  for  the  enterprise  when  it  seemed 
important  for  General  Motors  to  own  basic  patents  in  the 
friction  drive  field,  because  motor-car  design  might  turn 

The  Corporation  Established         165 

in  that  direction.  Other  dissolutions  were  Elmore,  Oakland 
Motor  Car,  Ltd.,  of  Canada,  the  General  Motors  Com- 
pany of  Michigan,  the  three  of  the  Heany  companies — 
Heany  Electric,  Heany  Lamp,  and  Tipless  Lamp. 

By  the  dissolution  of  the  Buick,  Oldsmobile,  Cadillac, 
Oakland,  Jackson-Church-Wilcox,  General  Motors  Truck, 
Northway,  and  Weston-Mott  corporations,  authorized  De- 
cember 1 4th,  and  consummated  at  the  turn  of  the  year,  the 
General  Motors  Corporation  stood  forth  as  an  operating 
company  with  the  above  divisions,  thus  completing  the 
evolution  from  the  holding  company  of  1908  to  the  oper- 
ating company  of  modern  days.  Each  of  the  divisions  named 
continued  to  operate  independently  in  the  sales  field  through 
its  own  sales  company  incorporated  in  the  nominal  sum  of 
$10,000.  Their  general  managers  were:2 

Buick Walter  P.  Chrysler 

Cadillac W.  C.  Leland 

General  Motors  Truck .  .  W.  L.  Day 
Jackson-Church-Wilcox  .G.  H.  Hannum 

Northway *  A.  L.  Cash 

Oakland F.  W.  Warner 

Oldsmobile   Edward  VerLinden 

Weston-Mott C.  S.  Mott 

Although  the  old  General  Motors  Company  of  New 
Jersey  no  longer  functioned,  its  legal  existence  continued 
for  some  months.  On  August  i,  1917,  its  outstanding  Pre- 
ferred stock  was  retired  at  $101.75,  and  the  Company  itself 
was  dissolved  on  August  3  of  that  year.  Its  last  holding, 
56,855  shares  of  General  Motors  Corporation  Common 
stock,  was  acquired  by  the  Corporation  in  connection  with 
a  plan  worked  out  to  interest  valuable  employees  in  the 
financial  success  of  the  enterprise. 

It  is  in  order  to  review  the  record  of  the  New  Jersey 
Company  as  it  passes  from  the  corporate  scene.  Through  it 
was  effected  the  first  automobile  merger.  It  came  on  the 
scene  when  the  industry  was  still  young  and  confused  and 
when  the  automobile  itself  was  still  on  trial  before  the 

2Messrs.  Chrysler,  Leland,  Day,  Warner,  and  Mott  were  vice-presidents  of 
General  Motors;  Messrs.  Hannum  and  VerLinden  later  became  vice-presi- 
dents. For  tenures  see  Appendix  II. 

166  The  Turning  Wheel 

public.  When  it  departed,  the  automobile  was  an  essential 
part  of  life,  a  reliance  in  the  routine  of  daily  living  and  also 
a  dynamic  tool,  as  events  in  Europe  were  showing.  The 
industry's  permanence  and  importance  were  recognized 
alike  by  the  man  in  the  street,  the  banker,  the  investor  and 
the  statesman.  General  Motors  of  New  Jersey  was  in  no 
small  degree  responsible  for  this  change  of  attitude.  It  had 
weathered  as  severe  financial  storms  as  ever  beset  a  young 
industrial  merger,  and  had  staged  a  startlingly  profitable 
"comeback."  Its  activities  had  increased  the  population  of 
numerous  towns  and  cities,  creating  fortunes  in  the  appreci- 
ation of  land  values.  It  had  been  free  of  serious  strikes; 
wages  rose  as  General  Motors  grew.  The  Company  had 
never  been  accused  of  unfair  commercial  practices  to 
throttle  competition ;  through  years  marked  by  intense  pub- 
lic criticism  of  corporations  and  numerous  government 
actions  aimed  at  corporations,  General  Motors  escaped 
both  attentions  without  question.  It  had  been  the  first  auto- 
mobile company  to  tap  the  great  banking  reservoirs  of  pub- 
lic credit,  the  first  whose  securities  were  admitted  to  the 
Stock  Exchange.  Its  Preferred  dividend  had  been  main- 
tained through  bad  days  and  good  and  its  Common  stock 
had  finally  reached  a  dividend  position  after  scoring  sweep- 
ing advances  as  a  result  of  high  earnings.  No  American  cor- 
poration of  the  period  had  passed  through  a  more  dramatic 
experience  or  emerged  with  a  cleaner  record. 

Chapter   XII 


.MERICA'S  declaration  of  war  in  April,  1917,  forced  a 
sharp  readjustment  of  objectives  on  the  automobile  world. 
No  one  quite  knew,  at  the  start,  what  the  government 
wanted  from  the  industry  in  the  way  of  goods  or  what  quan- 
tities of  raw  material  would  be  available  for  the  production 
of  cars  for  the  civilian  market.  Large  supplies  were  in 
process  and  storage,  but  after  these  had  been  assembled  and 
consumed,  what  could  the  industry  expect  to  run  on?  Un- 
certainty created  anxiety.  It  was  clear  that  the  automobile 
would  be  used  in  war  efforts,  but  how  and  when?  The 
answers  to  those  questions  were  momentous,  particularly 
for  the  inhabitants  of  cities  which  had  grown  rapidly  around 
the  plants  and  were  dependent  upon  daily  work  for  daily 
bread.  Ever  since  1910  the  total  number  of  General  Motors 
employees  had  been  rising  year  by  year,  from  10,000  in 
1910  to  25,666  in  1916.  The  year  1917  brought  the  first 
break  in  that  advance,  the  number  of  employees  falling 

With  as  much  speed  as  was  possible  in  a  country  so  un- 
prepared for  war  both  psychologically  and  industrially,  the 
government  set  up  a  program  for  war  manufacturing  which 
kept  many  automobile  plants  busy,  but  of  necessity  there 
was  a  dislocation  of  activity.  While  certain  plants  ran  night 
and  day  with  increased  staffs,  others  could  operate  only  on 
part  time,  using  a  limited  supply  of  materials  allocated  by 
government  agencies  conserving  the  various  goods  which 


168  The  Turning  Wheel 

were  needed  or  might  be  needed  for  war  purposes.  An 
automobile  production  program  is  an  immensely  compli- 
cated operation,  requiring  the  gathering  of  thousands  of 
parts  and  accurate  timing  of  supply  arrivals.  Absence  of 
any  one  of  a  thousand  parts,  or  shortage  of  some  raw  mate- 
rial, may  throw  out  of  alignment  an  entire  schedule  of 
operations  involving  thousands  of  men  and  millions  of  capi- 
tal. By  extraordinary  efforts  many  of  these  difficulties  of 
supply  were  overcome,  and  cars  continued  to  reach  the 
market  with  some  regularity.  With  war  activities  and  in- 
creased automobile  production  in  the  latter  part,  employ- 
ment for  1918  rose  swiftly  to  a  new  peak  of  49,118,  nearly 
double  the  names  on  the  1917  pay  roll. 

Such  cars  as  came  to  market  were  readily  sold.  Sales 
rallied  surprisingly  after  the  first  shock.  Although  millions 
of  young  men,  the  best  potential  buyers  in  the  light-car 
field,  were  mobilized,  and  savings  were  being  drawn  on 
for  war  loans,  nevertheless  automobiles  continued  to  sell. 
The  purchasing  power  of  the  country  was  high  as  a  result 
of  war  inflation  and  the  consequent  rise  in  wages.  While 
automobile  prices  rose  somewhat  in  answer  to  increased 
costs,  they  did  not  rise  in  proportion  to  food  and  clothing. 
The  people  had  money  to  buy  cars,  and  the  automobile  fitted 
into  the  high-speed  picture  of  the  war  years,  when  time  was 
the  most  important  element  in  a  life-and-death  struggle  and 
economy  was  a  forgotten  word.  With  millions  of  men  with- 
drawn from  employment,  those  at  home  increased  their 
activities  by  using  motor  cars  more  freely.  The  incentive  to 
save  time  would  carry  on  long  after  the  war  was  over  and 
be  one  of  the  factors  in  the  next  great  advance  of  the 
motor  car  in  popularity.  But,  for  the  remainder  of  1917  and 
the  greater  part  of  1918,  automobile  production  in  general 
went  forward  under  handicaps. 

All  General  Motors'  facilities  were,  of  course,  placed  at 
the  government's  disposal  the  instant  hostilities  were  begun. 
Of  the  twenty-three  operating  units  eighteen  were  engaged 
on  government  contracts.  The  gross  value  of  war  products 
actually  completed  by  the  Corporation  approximated 
$35,000,000.  War  production  included:  ambulances  and 
trucks,  5,000;  officers'  cars  (Cadillac),  2,350;  artillery 

The  War  Years 


tractor  engines  (Cadillac  8-cylinder  engine),  1,157;  Lib- 
erty motors  for  aircraft  work,  2,528  actually  completed  and 
delivered,  with  orders  for  over  10,000  on  the  books  when 
the  Armistice  was  signed.  The  Jackson-Church-Wilcox 
division,  operating  an  entire  plant  on  trench  mortar  shells, 
reached  a  production  of  20,000  per  day.  Oldsmobile  built 
field  kitchen  trailers.  Buick  constructed  special  factories  for 
the  production  of  the  famous  Liberty  airplane  motors.  Asso- 
ciated plants  made  shell  caps  and  other  munition  parts. 

Buick  war  tract  or  f 

It  was  a  proud  moment  for  General  Motors  when  the 
Cadillac  stock  car,  as  previously  noted,  after  gruelling  tests 
in  the  mountainous  wastes  of  the  Big  Bend  country  in 
Texas,  was  selected  as  standard  for  war  use  in  July,  1917. 
With  no  mechanical  changes,  but  painted  khaki-brown, 
Cadillacs  were  standard  transport  for  general  officers  and 
their  staffs  in  the  American  Expeditionary  Force  in  France. 
Cadillacs  were  also  used  by  officer  personnel  at  army  bases 
and  cantonments  in  this  country.  Liberty  motors  were  also 
made  by  Cadillac. 

In  addition  to  the  completed  war  orders,  large  quantities 
of  war  material  were  in  process  at  the  close  of  hostilities. 
Several  plants  had  been  constructed  rapidly  at  government 
suggestion  to  accommodate  war  orders.  Such  was  the  in- 
ception of  the  Central  Products  division  on  Holbrook 

170  The  Turning  Wheel 

Avenue,  Detroit,  near  the  Northway  division.  There  a  drop 
forge  plant  was  rushed  to  completion  in  1918,  with  a 
capacity  of  fifty  tons  a  day.  This  plant,  soon  expanded,  be- 
came the  nucleus  of  the  present  Chevrolet  group  in  Detroit. 
The  Central  Foundry  plant  at  Saginaw  was  also  pushed 
rapidly  forward,  126  acres  being  purchased  for  the  site. 

Mr.  Durant  tells  a  striking  war  story  illustrating  the 
uncertainties  of  the  war  years  and  indicating  some  of  the 
sacrifices  General  Motors  made  to  relieve  trying  situa- 
tions. The  Corporation  was  .requested  by  the  British  gov- 
ernment to  prepare  for  the  manufacture  of  a  new  airplane 
engine  in  large  quantity.  Accordingly  property  was  pur- 
chased, construction  begun  and  machinery  ordered.  After 
waiting  months  for  the  arrival  of  the  promised  sample 
engine  from  abroad,  Mr.  Durant  was  informed  that  noth- 
ing could  be  done.  The  first  engine  tested  abroad  had 
functioned  perfectly,  but  others  had  failed  and  the  plan 
was  declared  abandoned.  "Submit  your  bills,"  said  the 
Allies'  representatives.  "No,"  said  General  Motors  through 
its  president,  "We  will  take  the  loss  and  try  to  find  another 
use  for  the  property.  Under  the  circumstances  our  stock- 
holders are  not  likely  to  object."  Eventually  the  commit- 
ment was  worked  off  without  serious  loss  to  the  Corporation. 

Meantime,  the  directors  continued  putting  their  house 
in  order.  The  union  of  General  Motors  and  Chevrolet  was 
at  last  consummated  on  May  2,  1918,  when  General 
Motors  acquired  Chevrolet  for  282,684  shares  of  Common 
stock,  taking  over  all  assets  except  450,000  shares  of  Gen- 
eral Motors  Common  in  the  Chevrolet  treasury.  The  orig- 
inal Chevrolet  shareholders  realized  a  very  substantial  profit. 

Further  additions  to  the  roster  of  General  Motors  being 
contemplated,  as  well  as  plant  extensions,  the  certificate  of 
incorporation  was  amended  twice,  raising  the  authorized 
stock  of  the  Corporation  to  $200,000,000  on  March  20, 
1918,  and  to  $300,000,000  on  August  27th.  June  26,  pre- 
ceding, the  president  and  chairman  of  the  Finance  Com- 
mittee were  authorized  to  buy  United  Motors  for  $44,- 
065,000,  paying  approximately  three  quarters  of  that  sum 
in  Preferred  stock  and  one  quarter  in  Common  stock. 
United  Motors  had  been  organized  by  Mr.  Durant,  and 

The  War  Years 


under  the  presidency  of  Alfred  P.  Sloan,  Jr.,  was  soundly 
administered.  Thus  Hyatt  Roller  Bearings,  Dayton  En- 
gineering Laboratories,  New  Departure,  Harrison  Radia- 
tor, Remy  Electric,  and  Jaxon  Steel  Products  entered  the 
Corporation,  and  the  assets  of  Perlman  Rim  came  into  the 
Jaxon  company. 

That  the  directors  on  July  26,  1918,  were  optimistic 
about  the  early  and  successful  close  of  the  war  may  be  gath- 
ered from  the  fact  that  they  voted  on  that  day  to  invest 

Barn  in  Dayton,  Ohio;  first  home  of  Dayton  Engineering  Labora- 
tories Company.,  1909 

$1,000,000  in  a  40  percent  interest  in  the  Doehler  Die  Cast- 
ing Company  of  Brooklyn  and  authorized  J.  A.  Haskell  to 
buy  the  stock  of  the  Scripps-Booth  Corporation  of  Detroit. 
The  Scripps-Booth  car,  a  runabout  of  advanced  design, 
seemed  a  desirable  addition,  but  other  General  Motors 
units  soon  overtook  and  surpassed  Scripps-Booth,  in  ex- 
cellencies of  design,  resulting  in  its  abandonment. 

Midsummer,  1918,  saw  the  World  War  enter  its  final 
phase,  marked  by  the  last  despairing  German  drives  which 
were  finally  checked  at  the  Marne.  While  none  knew  how 
long  the  war  would  last,  the  Corporation  maintained  as  an 
objective  the  quickest  possible  return  to  large  production  as 
soon  as  quota  restrictions  should  be  removed. 

The  World  War  gave  General  Motors  a  decisive  turn  of 
interest  toward  aviation.  Production  of  Liberty  engines 
and  other  essential  aviation  supplies  in  its  plants  emphasized 

172  The  Turning  Wheel 

the  kinship  between  airplane  and  automobile  production. 
Other  manufacturers,  not  yet  in  General  Motors  but  with 
whom  the  Corporation  had  close  business  relations,  were 
also  participating  in  the  gigantic  aviation  enterprise  of  the 
government.  Fisher  Body,  with  a  vast  quantity  production 
program  under  way,  was  building  DeHavilands  in  its  great 
Number  18  plant  at  Detroit;  likewise  the  Dayton  industrial 
grouping  led  by  Mr.  Kettering.  The  Dayton-Wright  Air- 
plane Company,  the  spearhead  of  the  Dayton  aviation 
effort,  turned  out  completed  airplanes  for  a  time  faster 
than  any  other  company  has  done  before  or  since.  On  Sep- 
temper  25,  1919,  General  Motors  bought  all  outstanding 
shares  of  Dayton  Metal  Products  Company  and  certain 
assets  of  the  Dayton-Wright  Airplane  Company,  as  well  as 
other  Dayton  interests. 

The  post-war  situation,  however,  proved  discouraging  to 
aviation,  as  the  chief  customer,  the  government,  severely 
curtailed  its  buying.  The  market  was  saturated  with  planes 
and  materials.  It  seemed  that  years  must  elapse  before  avia- 
tion would  take  its  place  as  a  self-sustaining  industry;  in  the 
meantime,  development  would  proceed  largely  through  the 
assistance  of  government  buying  for  military  purposes  and 
government  subsidies  on  mail  contracts.  Accordingly  Gen- 
eral Motors,  while  still  acutely  aware  that  aviation  was  a 
kindred  industry,  felt  constrained  to  follow  the  policy  of 
watchful  waiting.  It  made  such  disposition  of  its  aviation 
properties  as  seemed  wise,  and  settled  down  to  wait  until 
1929,  when  some  of  the  "unknowns"  had  been  eliminated 
by  time  from  the  aviation  problem. 

This  conservative  approach  reflected  the  changed  atti- 
tude which  the  Corporation  adopted  in  other  respects  a 
little  later.  The  public  hopefully  awaited  a  strong  lead 
in  aviation;  and  from  many  sources  came  pressing  oppor- 
tunities for  General  Motors  to  assume  that  leadership.  But 
the  cool  heads  in  control  understood  that  aviation  was  in 
for  a  long  pull,  during  which  investors  seeking  quick  profits 
probably  would  be  disappointed.  While  the  standing  of 
General  Motors  would  have  brought  strong  public  support 
in  the  financing  of  a  vigorous  aviation  program,  it  was  be- 
lieved that  stockholders,  early  following  General  Motors 

The  War  Years  173 

lead,  would  take  losses  because  they  would  not  be  disposed 
to  wait  for  long-range  plans  to  mature.  Consequently  the 
Corporation  refused  all  offers  to  enter  airplane  production 
under  those  circumstances,  but  its  interest  in  aviation  con- 
tinued and  later  revived,  under  circumstances  and  with  re- 
sults to  be  related  in  Chapter  xxni:  "General  Motors  in 

General  Motors  decided  to  complete  the  United  Motors 
consolidation  by  using  a  certain  number  of  6  percent  Deben- 
tures in  place  of  Preferred  stock,  and  on  November  7, 
1918,  appropriate  action  was  taken.  On  December  loth,  the 
certificate  of  incorporation  was  amended  to  increase  the 
authorized  capital  to  $370,000,000  consisting  of  200,000 
shares  of  Preferred,  1,500,000  shares  of  Debenture,  and 
2,000,000  shares  of  Common,  all  par  $100,  to  provide  cap- 
ital for  the  expansion  swing  which  had  been  determined 
upon  with  the  renewal  of  peace.  Du  Pont  American  Indus- 
tries subscribed  for  $24,000,000  of  the  $100  par  value 
Common  stock  of  General  Motors  at  $120  per  share  as  of 
December  iQth,  which  was  approved  on  the  last  day  of 
1918  with  the  reservation  that  all  Common  stockholders 
could  subscribe  to  the  new  stock  at  $118  a  share  up  to  20 
percent  of  their  holdings.  At  these  two  meetings  three  other 
important  moves  were  made : 

1.  General    Motors    bought    the    minority    interest    in 

three  affiliated  Canadian  companies — McLaughlin 
Carriage  Company,  Ltd.,  Chevrolet  Motor  Com- 
pany of  Canada,  and  the  balance  of  the  Mc- 
Laughlin Motor  Car  Company,  Ltd. — for  49,000 
shares  of  its  Common  stock,  thereby  creating  the 
foundation  for  General  Motors  of  Canada,  Ltd., 
whose  Oshawa  and  other  plants  are  among  the  in- 
dustrial prides  of  the  Great  Dominion. 

2.  The  purchase  of  Lancaster  Steel  Products  at  Lan- 

caster, Pa.,  was  approved,  on  the  basis  of  500  Pre- 
ferred shares  and  3,555  Common  shares  and 
15,660  General  Motors  Debentures  held  by  Lan- 
caster for  16,175  shares  of  General  Motors  Com- 
mon and  5,000  shares  of  Debenture  stock. 


The  Turning  Wheel 







bfl        »-« 


(U     03 
2°    i-vl 

•~  *3       KJ 
&    £^  Jo 

4->  -$2 

C/3          PQ 

fe     fe 

a    o 



V.   ^*          ,^» 

S    3          3 



1    3 

S  °  -g 
"°.S  c  § 


aag  8 

0*    t"*   CO  CO 

00    M     >-,  VO 

HH     C\   o  ^ 

Q\  OO     ^  ^ 

%  >  *1       > 

§00        o 

t>.  MO 

S  |2 

a,  2  ° 

rS  O    2 

C  s 

O  * 

r  ° 

o  *J 

C  GJ 

4-1  V 


j_         r    £ 
4-1          r"    > 






I  £ 

c    o 

CO       •• 

<U     co 

>     C 

•r-1     O 

ON    O 

t-H  C 


«-i  .id 

O     <u 

MH    ^J 

,Q    ^ 


-    bb 


"Q    3 

a  o 
s  ^ 
Q  ^ 

>>  c 

T3  ^ 
O  i-1 









Dayton  Enginee 


s     § 




sz«     Z 

=  § 


U      PJ     C 






sd     s 

i  & 

-t  ^     O 

2  <u  -M 

O      4-> 

C    u 


cJ  •£ 
c  -r 

c^    I 


P3   ^ 

«  s 


O     tJD    2     w 
>          2  *H 

VH       ^       O,     CS 

cS  2  8^ 


2  ^  c  S      "§ 

iU.§   I 




C     M 


u  3 

.y    ^ 

«j   "O 

^   S 


C  \D 






The  War  Years  175 

3.  The  purchase  of  United  Motors,  instituted  earlier 
in  the  year,  was  approved  on  December  31,  at  a 
price  of  $45,000,000,  for  which  purpose  99,564 
shares  of  Common  stock  and  298,692  shares  of 
Debenture  stock  were  authorized.  General  Motors 
already  owned  106,000  shares  of  United  Motors, 
which  stock  was  cancelled. 

In  1918  General  Motors,  from  both  war  orders  and 
advancing  prices  on  motor-cars,  recorded  the  high  net  sales 
to  date — $269,796,829 — but  its  margin  of  profit  had  been 
low  and  only  $1,667,753  was  left  for  reinvestment  after 
paying  dividends  which  had  been  established  at  the  rate  of 
$3  a  quarter  on  the  $100  par  Common  stock  in  the  preced- 
ing year.  Bonus  awards  for  conspicuous  services  in  1918 
were  the  equivalent  of  490,238  shares  of  the  present  $10 
par  value  Common  stock.1 

In  the  year  of  America's  sustained  war  effort,  1918,  the 
Corporation,  due  to  government  reduction  of  the  business, 
barely  earned  its  established  dividend,  but  its  contribution 
to  employees  remained  high.  Although  resentment  against 
profiteering  was  in  the  air,  the  record  left  General  Motors 
free  of  criticism  in  that  regard.  As  an  essentially  peace-time 
business,  General  Motors  from  top  to  bottom  was  glad  to 
get  back  to  work  on  its  big  job  of  making  motor  cars  for  a 
world  no  longer  torn  by  war. 

lSee  Chap.  XXVIII  on  "Cooperative  Plans,"  for  a  full  account  of  the 
Bonus  and  Investment  Funds. 

Chapter   XIII 


IENERAL  MOTORS  swung  into  the  post-war  boom  of 
1919  with  a  spirit  which  matched  the  boldness  of  the  coun- 
try's mood.  Peace  found  the  nation  jubilant,  united,  and  con- 
fident in  its  strength.  New  high  wage  levels  had  been 
reached,  and  it  was  hardly  possible  for  a  nation  so  cir- 
cumstanced to  believe  that  they  would  recede.  Prices  were 
high,  also,  but  it  was  thought  that  the  need  of  Europe  for 
supplies  would  keep  them  up  for  some  time  to  come.  The 
automobile  industry,  in  general,  concluded  that  it  must 
make  up  for  time  lost  during  the  war  interruption  in  pro- 
duction. Consequently,  the  year  1919  records  an  amazing 
expansion  program  for  the  Corporation  in  the  course  of 
which  the  authorized  capital  stock  was  increased  from 
$370,000,000  to  $1,020,000,000,  represented  by  5,000,000 
shares  of  Common  stock  of  $100  par  value,  5,000,000 
shares  of  6  percent  Debenture  stock  and  200,000  shares  of 
6  percent  Preferred  stock.  General  Motors  became  a 
billion-dollar  corporation  on  paper,  but  less  than  a  third  of 
its  Common  stock  was  issued. 

General  Motors  of  Canada,  Ltd.,  had  been  organized 
November  8,  1918,  and  before  the  end  of  the  year  its 
authorized  capital  was  increased  to  $10,000,000.  This 
strong  Canadian  company,  located  at  Oshawa,  Ontario, 
succeeded  several  Canadian  companies  theretofore  repre- 
senting various  units  of  General  Motors  in  the  Dominion, 
as  will  be  more  fully  explained  in  Chapter  xvil. 


The  Expanding  Corporation         177 

General  Motors  Acceptance  Corporation  was  incor- 
porated under  the  banking  law  of  New  York  on  January 
29,  1919,  to  finance  instalment  sales  of  General  Motors 
products  "through  the  proper  application  of  the  credit 
function."  Twenty  thousand  shares  of  GMAC  stock  were 
purchased  by  the  parent  corporation  at  $125,  enabling  the 
new  subsidiary  to  begin  operations  with  a  capital  of 
$2,000,000  and  a  surplus  of  $500,000.  The  rise  of  GMAC 
is  fully  narrated  in  Chapter  xxvn :  "Financing  and  Insuring 
the  Buyer." 

At  the  meeting  of  February  2yth,  steps  were  taken  to 
complete  General  Motors  ownership  of  New  Departure 
Manufacturing  Company  of  Bristol,  Connecticut,  and  Har- 
rison Radiator  Corporation  of  Lockport,  New  York,  two 
companies  which  had  come  into  the  General  Motors  circle 
through  the  purchase  of  United  Motors. 

Two  new  accumulations  were  made,  both  of  which  bulk 
large  in  Corporation  history,  though  for  different  reasons. 
In  1918-19  the  Corporation  bought  into  the  tractor  busi- 
ness, among  its  purchases  being  the  Janesville  Machine 
Company  at  Janesville,  Wisconsin,  and  122  acres  of  land 
on  which  a  new  plant  was  to  be  erected  ready  for  operation 
in  July,  1919.  The  Corporation's  farm  implement  busi- 
ness is  reported  as  3,000  tractors  and  56,400  farm  imple- 
ments in  Poor's  Manual  for  1919,  which  also  reports  the 
Corporation  holdings  in  Samson  Sieve-Grip  Tractor  Com- 
pany of  Stockton,  California,  as  $400,000  and  in  the 
Janesville  Machine  Company,  Janesville,  Wisconsin,  as 
$1,000,000,  both  representing  complete  ownership  of  all 
Common  stock  issued  by  both  companies.  Later  the  Cor- 
poration's holdings  in  the  Janesville  Machine  Company 
rose  to  $2,250,000,  where  it  stood  when  that  company  was 
dissolved  and  its  operations  consolidated  with  the  Samson 
Tractor  division.  The  latter  soon  took  over  all  the  assets 
of  the  Samson  Sieve-Grip  Tractor  Company.  This  mush- 
room expansion  in  the  direction  of  motorized  agriculture 
brought  heavy  losses. 

In  February  also  was  begun  the  most  significant  enter- 
prise the  Corporation  had  as  yet  undertaken  in  the  field  of 
social  research.  A  new  spirit  of  brotherhood  was  abroad  in 

178  The  Turning  Wheel 

the  land,  and  General  Motors  was  one  of  the  first  to  re- 
spond to  it.  Owing  to  the  uncertainties  attendant  upon  the 
change  from  war  activities  to  peace-time  pursuits,  the  Cor- 
poration considered  it  necessary  to  have  the  basic  needs  and 
living  standards  of  its  employees  studied,  to  the  end  that 
wage  rates  would  be  fair  and  living  conditions  acceptable 
to  thousands  of  families  likely  to  move  into  cities  where 
General  Motors  was  rapidly  expanding  its  operations. 
Accordingly,  the  Executive  Committee,  consisting  of 
Messrs.  Durant,  Haskell,  and  Chrysler,  was  directed  to  in- 
vestigate industrial  conditions  affecting  the  plants  of  the 
Corporation.  These  gentlemen  promptly  appointed  a 
research  committee,  which  met  in  Detroit  on  February  I7th 
and  proceeded  at  once  with  an  extensive  study  of  the  labor 
situation,  living  conditions  and  other  industrial  problems 
of  General  Motors  plants.  An  imposing  body  of  data  was 
collected  on  bonus  plans,  group  insurance,  employees'  com- 
mittees, pension  plans,  etc.  The  findings  of  this  Research 
Committee  launched  the  Corporation  upon  a  large-scale 
housing  program  in  Detroit,  Flint,  Pontiac,  and  Lansing, 
Michigan;  Bristol,  Connecticut;  and  elsewhere,  and  also 
led  it  into  other  activities  aimed  at  promoting  the  well- 
being  and  contentment  of  employees. 

This  elaborate  report,  one  of  the  most  comprehensive 
social  studies  ever  made  by  an  American  corporation,  is  a 
testimonial  to  the  energetic  altruism  of  the  chairman  of  the 
Research  Committee,  Mr.  J.  Amory  Haskell,  in  whose 
kindly  and  judicial  mind  the  well-being  of  employees  ever 
was  a  first  consideration.  Mr.  Haskell,  after  a  long  and 
impressive  career  in  the  explosives  industry  in  competition 
with  the  du  Fonts,  had  brought  his  company  into  the 
du  Pont  organization,  and  entered  General  Motors  as  one 
of  the  du  Pont  directors.  A  conservative  man,  yet  with 
broad  humanitarian  interests,  he  was  a  force  in  General 
Motors  affairs  until  his  death  in  1923. 

This  disposition  to  consider  employee  interests  had  an- 
other significant  development  in  the  founding  of  General 
Motors  Institute  of  Technology  at  Flint,  described  in 
Chapter  xxvin,  on  ''Cooperative  Plans." 

The  Expanding  Corporation          179 

In  March,  1919,  General  Motors  bought  additional 
stock  in  the  Frigidaire  Corporation  for  $56,366.50.  Frigi- 
daire,  originally  Guardian  Frigerator  Corporation,  was 
bought  by  Mr.  Durant  in  1916  and  is  another  example  of 
his  power  to  read  the  future.  The  rise  of  Frigidaire  to  first 
place  in  the  quantity  production  of  electric  refrigerators 
will  be  told  elsewhere. 

Occurred  then,  also,  the  Corporation's  entry  into 
Muncie,  Indiana,  where  it  bought  the  Interstate  Motor 
Company  for  $248,000  and  paid  $40,000  for  additional 
land.  For  a  brief  period,  the  Sheridan  car  was  made  there. 
The  property  is  now  the  seat  of  production  for  Delco-Remy 

On  April  24,  1919,  the  Corporation  began  extensive  real 
estate  and  construction  projects  destined  to  have  an  im- 
portant effect  upon  its  history,  since  they  diverted  many 
millions  of  dollars  from  the  treasury  and  were  still  un- 
completed when  the  prosperity  of  the  post-war  boom 
waned.  The  most  ambitious  of  these  was  the  construction 
of  the  mammoth  office  building  at  Detroit,  planned  as  the 
largest  structure  of  its  kind  ever  built.  Covering  the  entire 
block  bounded  by  Grand  Boulevard,  Cass  and  Second 
avenues  and  Milwaukee  Street,  it  is  now  the  central  office 
of  the  Corporation.  The  Durant  Building  Corporation  hav- 
ing been  formed,  General  Motors  authorized  subscription 
to  $3,000,000  of  its  stock  on  April  24th.  Before  it  was 
completed,  this  building  cost  approximately  $20,000,000. 
From  April  to  July  the  Corporation  created  various  com- 
panies for  housing  construction,  the  authorized  capital  in 
each  company  being  as  follows,  although  considerably  more 
money  was  spent  for  this  purpose : 

$500,000  in  the  Bristol  Realty  Company,  Bristol,  Con- 
necticut, for  the  accommodation  of  New  Departure 

$3,500,000  in  the  Modern  Housing  Corporation,  to 
build  houses  in  Flint,  Pontiac  and  Detroit. 

$200,000  in  the  Lansing  Home  Building  Company. 

$200,000  in  the  House  Financing  Company  of  Detroit. 

General  Motors  Building,  Detroit 


The  Expanding  Corporation         181 

On  June  I2th,  the  stockholders  ratified  the  increase  in 
authorized  stock  to  $1,020,000,000,  the  details  of  which 
have  already  been  given  at  the  beginning  of  this  chapter. 

From  August  on,  the  Corporation  expanded  rapidly.  The 
directors  authorized  the  purchase  of  the  International 
Arms  &  Fuse  Company  plant  at  Bloomfield,  New  Jersey,  for 
$1,175,000  and  of  T.  W.  Warner  &  Company,  gear  makers 
of  Muncie,  Indiana,  for  $5,000,000.  Both  deals  were  de- 
layed in  maturing.  The  Muncie  property  not  being  then 
obtainable,  the  Corporation  took  a  lease  as  of  September 
25,  1919,  with  the  option  to  purchase  after  January  i, 
1923,  for  $902,000  in  Liberty  Bonds  and  31,238  shares 
of  Debenture  stock.  This  property  became  the  Muncie 
Products  division. 

Various  steps  in  the  expansion  program  were: 

The  purchase  of  the  Pontiac  Body  Company  and  its  ad- 
dition to  Oakland. 

The  purchase  of  Domestic  Engineering  Company  of  Day- 
ton, Ohio,  for  35,451  shares  of  Common  stock,  given 
in  exchange  for  33,070  shares  of  Domestic  Engineer- 
ing Company  stock  valued  at  $9,000,000. 

A  merger  was  effected  with  Dayton  Metal  Products  Com- 
pany, whereby  General  Motors  acquired  all  the  out- 
standing shares  of  Metal  Products  (60,000  shares)  in 
return  for  25,338  shares  of  Debenture  stock  and 
21,457  shares  of  Common  stock  in  the  Corporation. 

The  Dayton-Wright  Airplane  Company,  with  assets  in 
excess  of  $1,200,000,  was  bought  for  10,960  shares  of 
Debenture  stock. 

Through  reorganizations  and  transfers  all  of  these  Day- 
ton companies  have  passed  from  the  picture,  and  their 
plants  are  now  used  for  other  Corporation  products. 

Of  outstanding  importance  in  the  Corporation's  history, 
also,  is  the  decision  taken  on  September  25th  to  buy  a 
three  fifths  interest  in  the  Fisher  Body  Corporation,  which 
was  effected  by  the  purchase  of  300,000  shares  of  Fisher 
Body  Common  stock  at  $92  a  share.  The  purchase  con- 
tract, among  many  other  provisions  safeguarding  the  Fisher 

182  The  Turning  Wheel 

interests,  required  these  shares  to  be  deposited  in  a  voting 
trust.  The  importance  of  this  alliance,  which  was  later  ex- 
tended to  the  point  of  complete  merger,  can  hardly  be  over- 
estimated.1 It  gave  General  Motors  first  call  on  the  pro- 
duction of  the  largest  and  best  equipped  body-building 
plants  in  the  world.  With  the  steady  trend  toward  closed 
cars,  the  Fisher  brothers,  experienced  from  youth  in  the 

One  of  the  founders  of  Fisher  Body 

difficult  arts  of  body  design  and  construction,  had  pushed 
forward  until  they  occupied  a  foremost  position  in  their 
line  both  as  to  quantity  and  quality.  The  Fisher  name  had 
become  known  far  and  wide,  and  the  presence  of  a  Fisher 
body  on  any  car  recommended  it  to  the  consuming  public. 
By  this  one  decisive  step  the  General  Motors  Corporation 
wrote  off  future  body  difficulties  by  placing  that  business  in 
the  hands  of  outstanding  specialists  in  the  field  of  body 
manufacture.  With  advancing  complexities  in  design  and 
manufacture,  the  wisdom  of  this  alliance  has  become  in- 
creasingly manifest. 

This  date,  September  25,  1919,  registers  the  high-water 
mark  of  optimism  during  the  Durant  presidency.  The  Cor- 
poration had  expanded  its  capital,  brought  under  control 
many  sources  of  supply,  and  on  that  date  authorized  the 

*See  Chap.  XX:  "Body  by  Fisher:  The  Motor-Car  as  a  Style  Vehicle." 

The  Expanding  Corporation          183 

investment  of  up  to  $500,000  in  the  Common  stock  of 
Goodyear  Tire  &  Rubber  Company  of  Akron,  which  hold- 
ing was  sold  soon  afterward. 

If  General  Motors  is  considered  merely  a  manufacturer 
and  seller  of  automobiles,  the  expansion  from  1916  to  1920 
contains  a  good  many  inexplicable  elements;  but  the  key  to 
this  period  can  be  found  in  the  word  "motors."  As  will  be 
shown  in  Chapter  xv,  this  is  the  key  to  later  diversification 
of  the  Corporation's  products,  especially  in  the  direction 
of  household,  office,  store,  and  farm  equipment.  The  Cor- 
poration was  no  longer  interested  merely  in  motors  that 
traveled  and  in  the  vehicles  they  propelled.  Its  scope  had 
been  enlarged  to  include  motors  designed  for  a  wide  variety 
of  specialized  and  stationary  uses,  and  in  the  commodities 
which  housed  motors — in  motorized  refrigerators,  motor- 
ized farm-lighting  plants,  motorized  fans,  and  other  equip- 
ment. The  variety  of  its  merchandise  would  grow  from  this 
time  on,  but  always  the  growth  would  be  in  the  direction 
of  motor  products.  Expansion  in  the  passenger  car  field 
stopped  with  the  acquisition  of  Scripps-Booth  which  the 
directors  were  ready  to  cut  adrift  in  1919,  and  the  short- 
lived experience  with  Sheridan  in  1920-21.  There  would 
be  further  expansion  in  commercial  vehicles,  but  in  general 
the  trend  of  General  Motors'  growth  in  the  post-war 
prosperity  was  toward  rounding  out  an  established  property 
and  pushing  it  toward  an  ever-improved  market  position 
with  the  consuming  public. 

During  the  1919  boom,  with  the  market  emphasis  on 
quantity,  General  Motors  reached  its  highest  earnings  to 
date,  more  than  $60,000,000  net  available  for  dividends, 
paid  nearly  $22,000,000  in  dividends,  and  allocated  more 
than  $38,000,000  to  reinvestment  in  the  business,  after 
setting  aside  some  $30,000,000  for  Federal  taxes  and  mis- 
cellaneous items.  But  even  that  sum  could  not  finance  the 
driving  expansion  program  under  way.  This  prosperity  was 
shared  with  employees  through  bonus  awards  in  which  were 
distributed  the  equivalent  of  402,485  shares  of  present  $10 
par  stock  and  14,191  shares  of  7  percent  Preferred  stock. 
The  number  of  employees  had  taken  another  upward  leap, 
reaching  nearly  86,000,  more  than  four  times  as  many  as  the 

184  The  Turning  Wheel 

Corporation  had  in  1913.  One  influence  of  the  World  War 
on  America  may  be  read  in  these  contrasting  employment 
figures  for  1913  and  1919.  The  period  included  two  booms 
in  which  well  managed  industrial  companies  expanded 
staffs,  drawing  population  from  the  land  to  the  cities  and 
concentrating  employment  as  it  had  never  been  concen- 
trated before  in  the  United  States. 

The  Corporation  signalized  the  advent  of  1920 — a  year 
destined  to  end  quite  otherwise  than  it  began — by  increas- 
ing its  authorized  capitalization  again,  this  time  to  56,100,- 
ooo  shares  divided  as  follows : 

200,000  shares  of  6  percent  Preferred,  par  $100 
900,000  shares  of  6  percent  Debenture,  par  $100 
5,000,000  shares  of  7  percent  Debenture  stock,  par  $100 
50,000,000  shares  of  Common  stock,  no  par  value,  of 

which  upwards  of  20,000,000  were  issued. 
The  senior  securities  issued  stood  in   1920  at  slightly 
above  $100,000,000. 

To  these  gigantic  proportions  W.  C.  Durant  had  seen 
his  brain-child  grow  from  the  original  Buick  Motor  Com- 
pany of  $75,000.  Conservative  men  began  to  wonder  where 
this  victorious  march  would  end,  and  amazement  gave  way 
to  some  concern  when  falling  grain  prices  in  the  spring  of 
1920  foreshadowed  the  post-war  decline. 

During  the  first  three  months  of  the  year  General  Motors 
went  along  with  its  program  of  internal  consolidations. 
Minority  interests  in  Chevrolet  of  California  were  bought 
and  steps  were  taken  to  complete  ownership  of  Klaxon 
horn.  Two  companies  were  dissolved — Samson  Sieve-Grip 
Tractor  and  the  Michigan  Crankshaft  Company. 

The  former  name,  Samson,  is  still  one  to  rouse  lurid 
reminiscences  among  the  old-timers  in  the  General  Motors 
family.  Under  the  Samson  banner  the  Corporation  entered 
the  farm  tractor  field,  expanding  for  that  purpose  the 
Janesville,  Wisconsin,  plant,  later  taken  over  by  Chevrolet. 
In  the  full  flush  of  his  enthusiasm  for  motorized  farm 
transport,  Mr.  Durant  had  not  only  spent  lavishly  on  the 
Samson  tractor;  he  had  also  tried  to  tame  the  Iron  Horse, 

The  Expanding  Corporation         185 

a  small  tractor  for  garden  use,  ordering  large  quantities 
of  material  for  its  manufacture.  Always  alert  to  new  notes 
in  sales  campaigns,  he  undertook  to  revolutionize  imple- 
ment selling  by  organizing  elaborate  displays  in  specially 
designed  show  places  on  the  Pacific  Coast.  These  displays 
were  beautiful  examples  of  advanced  merchandising,  but 
events  showed  them  to  be  ahead  of  their  time.  Indeed,  the 
whole  program  of  farm  motorization  so  popular  then  was 
too  advanced,  being  founded  upon  the  assumption  that  the 
world  could  use  practically  unlimited  quantities  of  food- 
stuffs at  high  prices.  The  slump  in  farm  prices  which  set 
in  with  the  post-war  depression  was  to  continue  for  years, 
reducing  operations  by  nearly  all  manufacturers  in  that  field. 

By  June,  train-loads  of  motor  cars  standing  undelivered 
in  Western  terminals  gave  a  hint  of  what  was  coming.  Live 
stock  and  grain  prices  were  unsettled,  and  unemployment 
began  to  show  itself.  By  late  summer  the  decline  reached  a 
point  at  which  General  Motors  could  hardly  look  for  earn- 
ings to  flow  in  rapidly  enough  to  meet  the  charges  of  its 
uncompleted  expansion  program.  The  pendulum  which  had 
been  rising  with  but  slight  interruption  since  1915  began 
a  downward  swing. 

In  a  retrospective  vein  President  Alfred  P.  Sloan,  Jr.,  ad- 
dressing the  automobile  editors  of  American  newspapers  at 
the  Proving  Ground  at  Milford,  Michigan  in  1927,  graphi- 
cally reviewed  the  1920  situation  as  he  saw  it: 

In  the  spring  of  1920,  General  Motors  found  itself,  as  it  appeared 
at  the  moment,  in  a  good  position.  On  account  of  the  limitation 
of  automotive  production  during  the  war  there  was  a  great 
shortage  of  cars.  Every  car  that  could  be  produced  was  produced 
— and  could  be  sold  at  almost  any  price.  So  far  as  any  one  could 
see,  there  was  no  reason  why  that  prosperity  should  not  continue 
for  a  time  at  least.  I  liken  our  position  then  to  a  big  ship  in  the 
ocean.  We  were  sailing  along  at  full  speed,  the  sun  was  shining,  and 
there  was  no  cloud  in  the  sky  that  would  indicate  an  approaching 
storm.  Many  of  you  have,  of  course,  crossed  the  ocean  and  you 
can  visualize  just  that  sort  of  a  picture — yet  what  happened?  In 
September  of  that  year,  almost  over  night,  values  commenced  to 
fall.  The  liquidation  from  the  inflated  prices  resulting  from  the 
war  had  set  in.  Practically  all  schedules  or  a  large  part  of  them 

186  The  Turning  Wheel 

were  cancelled.  Inventory  commenced  to  roll  in,  and,  before  it 
was  realized  what  was  happening,  this  great  ship  of  ours  was  in 
the  midst  of  a  terrific  storm.  As  a  matter  of  fact,  before  control 
could  be  obtained  General  Motors  found  itself  in  a  position  of 
having  to  go  to  its  bankers  for  loans  aggregating  $80,000,000  and 
although,  as  we  look  at  things  from  today's  standpoint,  that  isn't 
such  a  very  large  amount  of  money,  yet  when  you  must  have 
$80,000,000  and  haven't  got  it,  it  becomes  an  enormous  sum  of 
money,  and  if  we  had  not  had  the  confidence  and  support  of  the 
strongest  banking  interests  our  ship  could  never  have  weathered 
the  storm. 

On  this  occasion  General  Motors  had  strong  banking 
connections.  An  agreement  was  entered  into  for  the  distri- 
bution of  3,200,000  shares  of  Common  stock  at  $20  a 
share.  Explosives  Trades,  Ltd.,  of  London  was  interested 
by  the  du  Fonts  to  the  extent  of  1,800,000  shares,  the  bal- 
ance being  underwritten  by  J.  P.  Morgan  &  Company. 

The  Explosives  Trades  passed  a  part  of  its  allotment  in 
this  undertaking  to  Canadian  Explosives,  Ltd.,  a  subsidiary, 
but  before  their  subscription  had  been  taken  up,  the  Ameri- 
can stock  market  showed  such  signs  of  weakness  that  doubt 
arose  whether  the  Canadians  would  purchase  at  the  figure. 
On  top  of  the  general  situation,  General  Motors  had  weak- 
nesses of  its  own,  the  net  results  of  heavy  commitments  and 
slackening  sales.  These  were  complicated  for  the  Corpora- 
tion by  the  recurrence  of  the  malady  already  noticed  as 
present  in  1910,  namely,  uncertainty  over  inventories.  Esti- 
mates furnished  the  Finance  Committee  were  approximate 
rather  than  definite,  and  even  the  approximations  did  not 
hold  as  the  returns  began  to  roll  in  from  the  wide-flung  field 
operations.  Again,  it  was  apparent  that  centralized  authority 
had  not  advanced  to  the  point  of  giving  the  central  office 
full  information  on  plant  commitments ;  there  was  still 
opportunity  for  plant  executives  to  act  independently  enough 
to  embarrass  the  Corporation.  The  initiative  of  plant  man- 
agers, which  the  Corporation  had  always  sought  to  pre- 
serve, and  which  had  worked  magnificently  on  the  up-swing, 
brought  complications  on  the  down-swing.  Discrepancies 
between  estimates  and  actualities,  in  the  matter  of  inventory 
commitments,  ran  into  scores  of  millions.  It  began  to  look 

The  Expanding  Corporation          187 

as  if  General  Motors  were  in  for  another  "squeeze, "  for 
another  experience  under  banker  control. 

With  the  stock  declining  on  the  Exchange,  a  serious  situa- 
tion developed  for  Mr.  Durant.  His  personal  operations 
in  the  stock  market  had  been  large  in  volume.  It  was  a 
common  saying  that  he  never  sold  General  Motors  but  al- 
ways bought  it.  On  the  1920  decline  he  kept  buying  until 
his  "Street  loans"  reached  a  critical  condition.  The  explana- 
tion given  by  his  friends  for  the  more  acute  phase  of  his 
trouble  is  that  he  endeavored,  by  extending  his  buying  on 
the  decline,  to  maintain  a  price  above  $20  in  order  that 
Canadian  Explosives  would  come  in  at  that  figure  and  take 
the  300,000  shares  allotted  to  them.  His  battle  with  the 
falling  market,  however,  reached  proportions  far  in  excess 
of  the  $6,000,000  involved  in  that  particular  transaction. 
When  his  situation  became  known  to  his  colleagues,  it  was 
found  that  his  commitments  to  bankers  and  brokers  ran  to 
several  times  that  figure.  His  operations  had  been  so  huge 
and  hurried  that  not  even  Mr.  Durant  himself  could  be  quite 
sure  what  he  owed.  With  each  conference  the  sum  kept 
growing,  until  it  is  said  to  have  approached  $35,000,000. 

On  a  falling  market,  with  public  confidence  low  and  Gen- 
eral Motors  in  a  position  of  rising  inventories  and  decreas- 
ing earnings,  the  difficulties  of  its  president  became  the 
difficulties  of  the  Corporation.  If  Mr.  Durant  were  to  be 
sold  out  by  his  bankers  and  brokers,  a  possibility  which  be- 
came more  and  more  imminent  with  every  point  decline,  in- 
volving $2,450,000  loss  to  him,  the  forced  sale  of  his 
pledged  securities  on  a  falling  market  would  have  meant  a 
wild  decline  in  the  whole  stock  list,  perhaps  even  a  panic, 
and  a  severe  blow  to  General  Motors'  credit.  On  March  i, 
1920,  a  ten-for-one  stock  split-up  had  been  effected,  and  the 
new  no  par  stock  had  already  lost  more  than  half  its 
market  value.  The  high  and  low  figures  for  1920  show  the 
market  nervousness — high  42,  low  I2J4. 

From  the  standpoint  of  both  the  general  welfare  and 
the  corporate  credit,  it  was  necessary  for  someone  to  finance 
a  settlement  with  Mr.  Durant's  brokers  and  take  his  stocks 
out  of  the  market.  In  the  General  Motors  picture  only  the 
du  Fonts  had  the  financial  strength  to  do  this.  Even  with 

188  The  Turning  Wheel 

their  resources  and  the  strong  incentives  of  their  existing 
stock  ownership,  their  "rescue"  was  an  adventure  of  faith, 
when  the  general  condition  of  the  market  and  the  country 
are  considered.  The  transaction  received  the  active  aid  of 
J.  P.  Morgan  &  Company  and  could  hardly  have  been  con- 
summated without  the  assistance  of  that  banking  house. 
While  general  recovery  was  slow,  it  was  steady  from  that 
point  on  until  returning  confidence  ushered  in  the  prosper- 
ity of  the  mid-'twenties. 

The  Durant  stocks  in  jeopardy  were  taken  over  at  a  price 
which  cleared  his  slate  and  left  him  a  not  inconsiderable 
margin.  His  friends  might  rate  his  fortune  at  this  stage  as 
far  less  than  his  deserts,  considering  his  services  and  record 
through  General  Motors  history,  but  on  the  other  hand, 
the  fact  that  something  was  saved  for  him  when  all  might 
have  been  lost  indicates  that  there  was  every  disposition  to 
deal  fairly  with  him  as  far  as  the  needs  of  a  desperate 
situation  would  permit.  He  resigned  the  presidency  on 
November  30,  1920,  after  four  and  a  half  years  in  office 
— years  of  great  achievement  and  bold  expansion  pushed 
at  a  pace  so  rapid  that  it  brought  difficulties. 

There  is  a  jaunty  nonchalance,  a  cool  courage,  in  the 
Durant  character  which  on  more  than  one  occasion  has  let 
him  rise  from  defeat.  It  showed  itself  in  1910  when  he 
turned  from  General  Motors  to  found  Chevrolet  and 
through  Chevrolet  to  recover  control  of  General  Motors. 
Indeed,  if  one  were  attempting  a  psychological  interpreta- 
tion of  so  complex  a  nature,  one  might  say  that  Mr.  Durant 
never  recognizes  defeat.  What  might  be  considered  by 
others  an  irretrievable  misfortune,  to  be  weighed  in  sorrow, 
is  to  him  but  a  turn  of  the  wheel  on  which  he  expects  to  swing 
round  to  the  top  again.  So  we  see  the  founder  of  General 
Motors  leaving  its  councils  for  the  second  and  last  time 
apparently  without  either  remorse  or  wrath,  and  saying,  as 
he  put  on  his  hat  with  something  of  a  flourish,  "Well,  it's 
moving  day." 

The  story  runs  that  immediately  after  his  eclipse  Mr. 
Durant  called  together  his  "crowd,"  those  who  had  fol- 
lowed him  into  General  Motors  and  out  of  it  and  back 
again.  He  told  them  that  the  powers  left  in  control  of  the 

The  Expanding  Corporation         189 

Corporation  were  "good  people/'  and  that  if  the  old  crowd 
wanted  to  help  "Billy"  Durant,  they  should  stay  with  the 
Corporation  as  long  as  they  were  wanted  and  serve  loyally, 
because  what  he  had  left  was  in  General  Motors  stock  and, 
consequently,  he  would  benefit  as  the  Corporation  bene- 
fited. A  few  days  later  one  of  his  friends  went  to  see  him 
at  a  small  office  he  had  opened  near  by,  to  say  that  he  had 
been  asked  by  the  du  Fonts  to  carry  on.  Mr.  Durant  ad- 
vised him  to  do  so.  Then,  going  to  the  window,  Mr.  Durant 
raised  the  shade  full  length,  and  said  with  his  head  high, 
"It's  a  new  day!"  No  better  last  line  could  be  written  for 
the  end  of  a  drama. 

As  the  founder  of  General  Motors  leaves  its  history,  it 
is  pertinent  to  review  his  achievements  briefly,  not  with  the 
idea  of  passing  judgment  in  either  a  laudatory  or  captious 
spirit,  but  rather  to  give  point  to  lessons  which  the  great 
army  of  General  Motors  employees  and  the  public  likewise 
may  draw  from  his  career  in  the  Corporation. 

First,  from  1904  to  1908,  W.  C.  Durant  "made"  Buick. 
Given  a  staunch  car  he  had  improved  it  steadily  by  a  rigid 
insistence  on  quality.  Although  Buick  was  moderately 
priced,  its  chief  insisted  on  good  workmanship  and  high- 
priced  materials.  Although  no  operating  man,  in  the  sense 
in  which  the  term  is  used  today,  he  had  high  standards  of 
what  manufacturing  should  be.  If  he  heard  that  Amesbury 
was  furnishing  expensive  fittings  for  Packard,  off  he  would 
go  to  Amesbury  to  buy  equally  good  fittings  for  Buick,  re- 
lying on  quantity  purchasing  power  to  bring  the  price  down 
to  reasonable  levels.  But  all  in  all  he  was  a  better  salesman 
than  manufacturer.  With  Buick,  Mr.  Durant  proved,  as  he 
had  proved  in  the  carriage  industry,  that  he  was  a  master 
salesman,  building  up  a  sales  organization  which  was  the 
marvel  of  its  day,  and  copied  by  competitors  as  far  as  they 
could  do  so.  Many  units  of  this  early  Buick  sales  organiza- 
tion are  still  dominant  in  the  distribution  of  motor  cars 
over  wide  areas. 

In  founding  and  financing  General  Motors  through  its 
first  expansion  period  without  first-class  banking  help,  W.  C. 
Durant  demonstrated  his  skill  as  a  promoter.  He  has  been 
called  America's  greatest  living  promoter,  and  no  exception 

190  The  Turning  Wheel 

has  ever  been  taken  to  that.  It  is  hardly  too  much  to  say 
that  this  quiet,  soft-spoken  man  is  the  greatest  promoter 
America  has  ever  seen  in  action.  General  Motors  is  today 
the  largest  American  corporation  whose  founding  was  the 
result  of  the  promoting  ability  of  a  single  individual,  and  as 
the  trend  is  toward  group  rather  than  individual  enter- 
prises, his  achievement  in  creating  General  Motors  may 
never  be  equalled  in  any  other  field.  Add  to  that  record 
Chevrolet  and  United  Motors,  now  merged  into  General 
Motors  but  brought  into  being  separately,  and  you  have  a 
three-way  success  which  is  simply  colossal.  Of  course,  vari- 
ous elements  in  this  energetic  program  proved  to  be  disap- 
pointments, but  enough  survived  to  carry  the  whole  through 
to  a  stupendous  success.  Napoleon  remains  a  great  soldier 
in  the  opinion  of  the  world  in  spite  of  Waterloo.  Both 
promoters  and  conquerors  sometimes  overstay  markets. 

One  can  call  Mr.  Durant  a  promoter  without  implying  a 
derogatory  note.  There  are  times  and  situations  in  which 
the  promoter  is  the  indispensable  man,  the  almost  inspired 
servant  of  society.  He  may  be  moved  chiefly  by  the  desire 
for  power  and  profits,  and  comprehend  scarcely  at  all  the 
social  results  of  his  activities;  nevertheless,  without  his  zeal 
in  bringing  labor  and  capital  together  along  the  line  of  his 
vision  the  world  would  have  to  wait  longer  than  necessary 
for  many  boons.  Of  course,  no  one  could  foresee  the  full 
impact  of  motors  on  American  life,  but  W.  C.  Durant  did 
recognize  some  of  the  important  futurities,  and  reacted 
toward  them  promptly.  His  early  championship  of  good 
roads  is  a  case  in  point,  his  keen  acceptance  of  electric  re- 
frigeration is  another,  and  a  third  was  his  instant  recogni- 
tion that  this  new  industry  could  not  afford  to  pay  low 
wages,  because  the  buying  power  of  the  masses  must  be  kept 
active  to  absorb  automobiles  in  quantity.  On  the  personal 
side,  he  gave  largely,  paid  generously  for  loyal  or  signifi- 
cant services,  followed  a  liberal  policy  toward  shareholders 
and  in  so  far  as  he  could,  made  sure  that  his  friends  and 
associates  prospered  along  with  himself. 

The  tap-root  of  the  Durant  nature  appears  to  have  been 
an  incurable  optimism  which  was  the  source  of  both  his 
driving  strength  and  his  besetting  weakness.  He  always 

The  Expanding  Corporation          191 

hoped  for  the  best,  and  never  prepared  for  the  worst  in 
time  to  ward  it  off.  In  his  long  business  career — he  said 
recently  that  he  had  been  in  business  fifty-five  years — he 
wrestled  many  times  with  the  business  cycle  without  appar- 
ently becoming  convinced  of  its  periodicity.  He  could  sell 
company  stock,  but  he  could  never  sell  his  personal  hold- 
ings. Because  Mr.  Durant  performed  financing  feats,  and 
handled  huge  sums  of  money,  the  notion  grew  that  he 
was  a  financier.  Thus  we  find  him  hailed  as  one  of  "the 
Master  Minds  of  Finance"  in  a  Wall  Street  series  during 
the  flush  period.  The  truth  is  that  he  was  no  financier  in 
the  sense  that  the  term  implies  caution  and  conservatism. 
He  could  act  boldly  and  daringly  with  money,  and  when 
circumstances  favored  the  finance  of  courage  he  seemed  a 
financier.  But  money  is  a  two-edged  sword,  and  when  cir- 
cumstances demanded  the  finance  of  caution  Mr.  Durant 
was  lost. 

Studied  defences  of  Mr.  Durant's  responsibility  for  the 
vast  expansion  program  of  1919  have  been  printed.  From 
these  it  would  appear  that  he  declines  to  take  full  responsi- 
bility for  some  of  the  moves  which  brought  the  Corporation 
treasury  low  when  the  pinch  in  sales  came.  It  is  said  that 
his  plans  for  the  office  building  in  Detroit,  and  the  con- 
current expansion  at  Cadillac,  were  considerably  more 
modest  than  the  expensive  projects  put  under  way;  that 
he  yielded  to  the  pressure  of  his  associates.  In  the  history 
of  an  industrial  enterprise  motives  are  more  difficult  to 
follow  than  results  of  record;  a  word,  an  opinion,  some- 
times even  a  gesture,  may  tip  the  scales  this  way  or  that.  In 
this  case  all  concerned  were  working  at  top  speed,  and  it 
was  inevitable  that  minds  did  not  always  meet  when  their 
possessors  thought  that  understanding  was  complete. 

There  is  an  old  saying  that  every  man  has  three  chances 
at  riches  in  the  course  of  the  average  business  career.  To 
put  it  another  way,  there  are  usually  three  complete  swings 
of  the  business  cycle  in  each  quarter-century.  It  is  human 
nature  to  "go  broke"  in  the  first  depression  one  experi- 
ences, rally  and  survive  the  second  by  a  narrow  squeak,  and 
then,  having  learned  the  lesson  of  experience,  prepare  for 
the  third  and  emerge  from  it  in  full  strength.  As  for  men, 

192  The  Turning  Wheel 

so  also  for  corporations.  The  special  circumstances  sur- 
rounding the  automobile  industry  in  1907  kept  Buick  from 
feeling  that  shock  severely,  but  a  crisis  came  to  General 
Motors  in  1910.  Ten  years  later  came  another;  it  found  the 
Corporation  better  prepared  to  weather  a  storm  though  by 
no  means  as  fully  prepared  as  it  would  be  ten  years  later. 

With  Mr.  Durant's  retirement,  Pierre  S.  du  Pont  be- 
came president,  continuing  as  chairman  of  the  board.  The 
new  burden  was  one  which  Mr.  du  Pont  did  not  seek;  in- 
deed, it  was  thrust  upon  him  by  the  dire  needs  of  the  situa- 
tion in  which  the  Corporation  found  itself.  In  its  1910 
trouble  the  bankers  who  rescued  General  Motors  insisted 
on  all  possible  legal  protection  as  embodied  in  mortgage 
and  voting  trust.  Although  the  1920  situation  of  the  Cor- 
poration was  not  as  serious  as  its  predecessor,  nevertheless 
a  receivership  might  have  been  asked  for  except  for  the  high 
degree  of  confidence  in  which  the  new  management  was  held 
by  the  banking  fraternity.  Mr.  du  Pont  began  his  presi- 
dency by  telling  his  associates  that  the  Corporation  was 
now  operating  under  the  most  delicate  and  honorable  re- 
lationship known  to  industry,  "a  receivership  of  our  own," 
and  in  this  spirit  the  Corporation  carried  on. 

The  totals  for  1920  were  relatively  high  because  of  the 
excellent  earnings  of  the  early  months  of  the  year,  so  the 
full  force  of  the  blow  would  not  be  of  record  until  1921. 
In  1920  General  Motors  earned  $22,000,000  less  than  in 
1919,  and  after  dividends  could  reinvest  only  $14,000,000. 
The  worst  was  still  to  come  from  the  accounting  stand- 
point, but  by  the  close  of  1920  the  situation  had  been  faced 
and  the  restoratives  applied. 

Chapter   XIV 


ITH  the  presidency  of  Mr.  du  Pont,  General  Motors 
history  entered  a  new  phase.  A  calm,  solid  man,  accustomed 
from  youth  to  large  affairs,  and  with  the  family  habit  of 
taking  broad,  far-reaching  views,  he  brought  to  his  new 
responsibility  a  poise  the  Corporation  had  never  quite 
known  before.  He  had  a  keen  sense  of  fiduciary  responsi- 
bility, and  yet  he  was  perfectly  aware,  as  many  conservative 
men  are  not,  that  by  no  means  all  the  values  of  an  organiza- 
tion can  be  listed  on  a  balance  sheet  and  appraised  in  dollars 
and  cents.  General  Motors  had  had  one  experience  of  that 
sort,  from  1910  to  1915,  and  it  had  ended  abruptly  with 
the  Durant  recapture  through  Chevrolet,  as  previously  de- 
scribed, precisely  because  Mr.  Durant  knew  the  hidden 
values  better  than  the  bankers  did. 

On  the  other  hand,  Mr.  du  Pont  was  never  driven  by  the 
devils  of  haste  and  expediency.  The  bright  face  of  danger 
had  no  allurement  for  him.  His  attitude  toward  the  vast 
property  committed  to  his  care  was  that  of  a  conservator 
rather  than  a  promoter.  His  faith  in  the  future  of  General 
Motors  and  of  the  automobile  industry  in  general  held  as 
firmly  as  that  of  his  former  associate,  but  he  saw  clearly  that 
his  job  lay  in  reorganization,  not  expansion.  General  Motors 
was  now  a  "made"  property,  and  as  such  in  need  of  long 
views  and  continuing  policies.  True,  it  had  been  made  by 
desperate  daring  as  well  as  by  steady  toil,  but  in  1920  it 
needed  balance  rather  than  daring.  The  emergency  problem 


194  The  Turning  Wheel 

was  to  save  the  structure  intact,  certain  that  the  swing  of 
business  would  restore  buying,  and  that  General  Motors 
would  come  up  with  the  country  if  the  weaknesses  recently 
revealed  were  courageously  met. 

Mr.  du  Font's  personality  was  not  long  in  making  itself 
felt.  At  the  beginning  he  faced  a  difficult  problem  in  re- 
establishing employee  morale  shaken  by  the  sudden  change 
of  management.  Remember  that  General  Motors  was  a 
Middle  Western  creation.  Important  posts  were  filled  by 
men  who  looked  upon  Mr.  du  Font's  predecessor  with 
adoration.  Many  of  them  had  followed  him  into  Chevrolet 
and  back  into  General  Motors.  Now  they  were  disposed  to 
stick  with  the  Corporation,  realizing  that  General  Motors 
was  here  to  stay  and  that  their  futures  were  at  stake. 
Nevertheless,  accustomed  as  they  were  to  the  Durant  pro- 
cedure, they  anticipated  difficulties  for  themselves  under 
du  Pont  management.  Changes  in  personnel  were  necessary 
in  many  cases;  and  events  indicated  a  need  for  a  wholesale 
realignment  of  relations  between  the  plants  and  the  central 
offices.  Whether  that  could  be  done  seemed  for  a  time  doubt- 
ful; the  situation  was  so  tense,  for  instance,  that  in  the  case 
of  one  new  manager  there  was  grave  doubt  whether  he 
might  be  allowed  access  to  his  office  without  interference 
from  men  who  were  being  replaced. 

This  nervousness  applied  not  only  to  managers  but  to 
labor  staffs  as  well,  and  through  them  spread  to  whole  com- 
munities. In  no  small  degree  the  high  morale  of  General 
Motors  labor  had  been  due  to  the  dramatic  leadership  of 
the  former  president.  To  his  old  employees  Mr.  Durant 
had  been  both  boss  and  friend,  and  while  thousands  of  the 
later  comers  in  his  labor  ranks  had  never  seen  him  in  the 
flesh,  they  knew  him  by  hearsay.  Years  ago  he  had  taken  on 
for  them  the  attributes  of  myth  and  story.  He  was  their 
hero,  their  superman,  doing  the  things  they  would  like  to 
do  if  they  could.  Particularly  they  had  rejoiced  when,  like 
a  Lochinvar  out  of  the  West,  he  had  stolen  the  General 
Motors  bride  from  the  Eastern  bankers  in  1915.  Now  they 
began  to  grumble  about  absentee  ownership  and  Eastern 
control,  and  wonder  whether  their  jobs  and  houses  would  be 
worth  anything  a  year  hence.  Even  the  substantial  business 


President,  General  Motors  Corporation,  1920—23 

196  The  Turning  Wheel 

men  of  the  Michigan  cities  with  General  Motors  plants 
grew  panicky  at  the  thought  of  what  might  happen  to  them 
and  their  investments  if,  under  the  aegis  of  the  du  Fonts, 
plants  were  to  be  moved  from  West  to  East.  Absurd  rumors 
to  that  effect  gathered  headway;  Chambers  of  Commerce 
grew  excited  and  wrote  in  to  plead  consideration  for  their 
communities  in  the  pending  changes. 

As  soon  as  bandages  had  been  applied  to  the  sorest  of 
the  many  sore  spots  on  the  corporate  body,  President  du 
Pont  took  a  statesmanlike  swing  around  the  General  Motors 
circle.  He  visited  plants  and  talked  to  groups  of  employees 
and  associations  of  citizens.  Everywhere  he  went  he  had 
the  benefit  of  what  the  diplomats  call  a  "good  press."  Local 
interests,  from  banks  down  to  laborers,  were  reassured 
when  they  beheld  this  kindly,  steady  man  and  heard  him 
tell  them  to  be  of  good  cheer.  General  Motors,  he  said, 
would  stand  by  its  investments  in  their  communities  as  long 
as  those  communities  stood  by  General  Motors.  There 
would  be  changes,  of  course,  since  not  to  change  at  the 
challenge  of  events  was  to  risk  corporate  dry-rot,  but  the 
changes  would  benefit  rather  than  injure  the  workers  and 
the  communities  sustained  by  General  Motors  pay  rolls. 
Opinion  in  Michigan  completely  reversed  itself  as  soon  as  it 
heard  that  message :  real  estate  values  began  to  regain  their 
buoyancy;  labor,  its  morale;  and  plant  executives,  their 

As  on  two  previous  occasions  in  the  Corporation's  history 
there  were  unfortunate  accumulations  to  sweep  away  while 
reorganization  efforts  went  forward.  Liquidation  of  the  ex- 
pensive Janesville  tractor  experiment  began.  The  Doyles- 
town  Agricultural  Company,  bought  as  part  of  the  farm 
motorization  program,  went  for  $48,500,  a  loss  of  almost 
$100,000.  The  unfortunate  Heany  venture  was  finally  wiped 
off  the  Corporation  books  when  $1,205,000  in  cash  and 
securities  was  received  from  General  Electric  in  return  for 
General  Motors  interests  in  the  electric  light  business. 

An  action  most  reassuring  to  the  city  of  Flint  was  a  Gen- 
eral Motors  subscription  to  $300,000  worth  of  capital 
stock  in  the  Durant  Hotel  erected  there  and  named  for  the 
founder  of  the  Corporation. 

New  Era  Under  President  du  Pont    197 

Meantime,  the  Corporation  undertook  a  comprehensive 
study  of  its  inter-relationships.  As  we  have  seen,  General 
Motors'  early  growth  was  swift  and  chaotic.  In  that  stage 
it  was  a  hybrid  rather  than  a  unified  organization.  Attempts 
to  organize  it  had  been  partially  successful,  but  never  wholly 
so,  and  for  obvious  reasons.  Here  was  an  enormous 
ganglion  of  highly  active  units,  each  of  which  faced  prob- 
lems peculiar  to  itself,  each  of  which  made  its  own  approach 
to  the  public  in  the  market  place,  and  each  of  which  had 
its  own  distinctive  pride.  Too  much  concentration  of 
authority  might  very  well  reduce  the  initiative  of  plant  man- 
agers and  the  efficiency  of  their  staffs.  On  the  other  hand, 
since  many  of  these  units  were  dealing  with  one  another, 
were  buying  similar  goods  and  services,  and  all  of  them  in 
the  last  analysis  were  taking  their  goods  to  the  same  market, 
the  intelligent  cooperation  of  the  units  was  desirable  up  to 
the  point  of  diminishing  returns.  Where  to  locate  that  point 
could  be  determined  only  by  experiment,  and  preferably  by 
cautious  rather  than  rash  experiment.  Consequently  various 
inter-divisional  bodies  were  set  up  to  integrate  policies  with 
respect  to  products,  sales,  purchasing,  advertising,  etc.,  thus 
initiating  a  program  of  close  coordination  but  preserving 
decentralized  administration. 

One  of  the  practical  reforms  of  this  period  deserves 
especial  attention  since  the  danger  which  it  corrected  had 
twice  played  a  destructive  role  by  bringing  General  Motors 
into  financial  straits.  This  was  a  reasonable  control  of  in- 
ventories. During  the  boom  days  when  supplies  were  rel- 
atively scarce,  plant  managers  had  fallen  into  the  habit  of 
ordering  in  excess  of  need,  sometimes  to  double  or  triple 
their  requirements,  merely  to  be  assured  that  they  would 
receive  enough  to  let  them  fill  their  production  programs. 
This  had  its  obvious  result.  When  business  slackened,  sup- 
plies were  pushed  out  and  sent  forward  faster  than  they 
could  be  used,  and  cancellations  were  not  always  applied 
in  time  to  check  the  flow.  Sometimes  these  cancellations 
did  not  hold,  particularly  if  the  order  had  been  started  on 
its  production  process.  The  new  management  met  this  by 
limiting  the  independent  buying  power  of  plant  managers 

198  The  Turning  Wheel 

to  the  requirements  of  a  four  months'  forecast.  Control  of 
inventory  was  the  great  lesson  learned  from  the  troubles  of 

Another  weakness,  in  effect  the  other  side  of  the  inventory 
shield,  was  the  lack  of  information  regarding  retail  sales 
and  stocks  of  cars  in  dealers'  hands.  None  of  the  Corpora- 
tion's automobile  producers  knew  with  even  approximate 
accuracy  how  fast  their  cars  were  being  taken  out  of  the 
market  by  consumers;  consequently  they  had  no  yardstick 
immediately  available  by  which  to  regulate  production.  A 
first  step  was  taken  when  General  Motors  encouraged  R.  L. 
Polk  &  Company  to  gather  and  make  available  to  the 
entire  industry,  regular  and  frequent  statistics  of  motor-car 
registration  as  fast  as  the  figures  could  be  gathered. 

While  real  control  of  the  production  cycle,  based  on 
definite  information,  required  some  years  in  working  out,  the 
thought  impulses  in  that  direction  began  early  in  the  re- 
organization. By  1923  each  manufacturing  division  was 
obtaining  from  dealers  ten-day  reports  on  sales  and  cars  in 
stock;  by  1925  a  degree  of  control  over  production  pro- 
grams had  been  achieved  through  a  system  suggested  by 
Donaldson  Brown,  then  vice-president  in  charge  of  finance. 
The  essence  of  this  improvement  lies  in  control  of  produc- 
tion in  line  with  retail  demand  as  forecast  on  the  basis  of 
accurate  and  regular  reports  from  the  field,  the  final  con- 
trolling calculations  being  worked  out  with  reference  to  all 
calculable  factors  in  the  changing  economic  situation.  Major 
errors  of  calculation  have  since  been  few  and  usually  on  the 
side  of  conservatism,  so  that  at  no  time  since  this  system 
was  developed  has  General  Motors  been  seriously  threat- 
ened by  unwieldy  frozen  inventories  of  either  finished  goods 
or  parts  in  process.  The  decisions  in  this  field  are  arrived  at 
by  consultations  between  headquarters  and  local  managers 
with  accurately  gathered  facts,  usually  bringing  the  con- 
ferees into  agreement. 

General  Motors'  outstanding  contribution  to  industrial 
organization  has  been  made  along  this  and  similar  lines. 
Even  a  brief  survey  of  the  anatomy  of  industry  reveals  that, 
in  general,  industry  is  either  autocratic  or  feudal  in  its  set-up. 

New  Era  Under  President  du  Pont    199 

Mr.  Durant's  rule  over  General  Motors  during  his  in- 
cumbencies may  be  accepted  as  a  fair  example  of  the  second. 
Mr.  Durant  relied  on  trusted  lieutenants  and  trusted  some 
of  them  too  far,  their  capacities  sometimes  being  unequal 
to  their  responsibilities.  In  attempting  to  find  a  steady  base 
somewhere  between  these  different  ways  of  expressing  in- 
dustrial authority — which,  of  course,  is  a  sine  qua  non  of 
dependable  production — General  Motors  set  up  a  system  of 
liaison  and  control  for  which  corollaries  must  be  sought 
elsewhere  than  in  industry. 

This  system  has  been  likened  in  some  respects  to  the  staff- 
and-line  organization  of  an  efficient  army,  with  the  staff  as 
the  planner  and  coordinator  of  line  activities,  the  former 
mapping  the  strategy  of  the  campaign,  the  latter  applying 
the  tactics  most  likely  to  carry  out  the  strategy.  But  if  Gen- 
eral Motors'  organization  has  certain  military  aspects,  it 
has  others  which  are  quite  the  reverse  of  military.  Indeed, 
to  the  limited  extent  to  which  central  control  functions,  it 
does  so  through  a  system  of  coordination  seen  to  resemble 
the  activities  of  a  government  rather  than  that  of  an  army, 
while  local  managers,  within  the  frame  of  consultative  co- 
ordination described  above,  retain  administrative  jurisdic- 
tion over  and  responsibility  for  their  divisions,  each  of 
which  is  an  operating  unit.  Some  concessions  were  made  to 
the  economic  pressure  of  1931-33,  but  these  were  not  con- 
sidered ideal  relationships  and  were  discontinued  as  soon 
as  the  need  for  them  passed.  The  inter-divisional  set-up  of 
1927  is  thus  described  by  Mr.  Donaldson  Brown: 

Serving  in  the  direction  of  crystalizing  the  important  Corporation 
policies  and  making  them  effective,  and  to  facilitate  the  adapta- 
tion of  engineering  improvements  and  operating  methods,  there  are 
various  so-called  inter-divisional  relations  committees.  They  have 
suitable  representation  from  the  most  important  divisions,  and  are 
as  follows: 

General  Purchasing  Works  Managers 

General  Technical  General  Sales 

Institutional  Advertising 

200  The  Turning  Wheel 

These  committees  meet  separately  once  a  month.  The  President 
of  General  Motors  is  a  member  of  each  one  and  besides,  there  is  at 
least  one  other  member  of  the  Executive  Committee.  The  work 
of  the  committees  clears  through  various  central  office  staff  organ- 
izations, maintained  so  as  to  perfect  the  flow  of  information  back 
and  forth  and  to  facilitate  the  orderly  consideration  of  common 
problems  of  important  policy  and  procedure.  .  .  .  Where  there  is 
a  question  at  issue  on  the  score  of  Corporation  policy,  the  Presi- 
dent of  General  Motors  makes  the  decision  or  refers  it  to  the 
Executive  Committee.  Cases  of  this  kind  are  rare.1 

The  inter-divisional  relations  committees  named  above 
occupied  themselves  only  with  the  policies  in  their  respec- 
tive fields,  which  required  consideration  from  the  stand- 
point of  the  Corporation  as  a  whole,  rather  than  from  the 
standpoint  of  any  single  division. 

If  one  thinks  of  these  various  committees  as  conducting 
investigations  and  taking  the  evidence  of  experts  as  Con- 
gressional committees  do,  and  within  a  definite  range  of 
authority  making  decisions  which  are  either  put  into  effect 
immediately  or  referred  to  some  higher  committee  for  ap- 
proval, then  one  will  have  a  rough  idea  of  how  General 
Motors  functions.  An  illustration,  taken  from  the  same 
address,  will  show  how  a  committee  works  on  a  specific 
problem — that  of  prices : 

The  question  of  pricing  product  from  one  division  to  another  is  of 
great  importance.  Unless  a  true  competitive  situation  is  preserved, 
as  to  prices,  there  is  no  basis  upon  which  the  performance  of  the 
divisions  can  be  measured.  No  division  is  required  absolutely  to 
purchase  product  from  another  division.  In  their  interrelation  they 
are  encouraged  to  deal  just  as  they  would  with  outsiders.  The  in- 
dependent purchaser  that  is  buying  product  from  any  of  our  divi- 
sions is  assured  that  prices  to  it  are  exactly  in  line  with  prices 
charged  our  own  car  divisions.  Where  there  are  no  substantial  sales 
outside,  such  as  would  establish  a  competitive  basis,  the  buying 
division  determines  the  competitive  picture, — at  times  partial  re- 
quirements are  actually  purchased  from  outside  sources  so  as  to 
perfect  the  competitive  situation. 

1From  Vice-President  Donaldson  Brown's  address  to  the  American  Man- 
agement Association,  February,  1927. 

New  Era  Under  President  du  Pont    201 

After  the  date  of  Mr.  Brown's  speech  the  status  of  inter- 
divisional  relations  was  changed.  The  Operations  Com- 
mittee was  no  longer  inter-divisional  but  did  all  the  routine 
work  of  the  Executive  Committee.  The  roster  of  inter- 
divisional  relations  committees  was  then  reduced  to  four — 
General  Sales,  General  Purchasing,  General  Technical,  and 
Works  Managers.  Several  advisory  committees  were 
formed,  as  the  Public  Relations  Committee,  Advertising 
Committee,  and  the  like.  Somewhat  further  simplification 
in  the  direction  of  greater  divisional  autonomy  occurred  in 
October,  1933,  when  W.  S.  Knudsen  became  executive  vice- 
president  of  the  Corporation  in  charge  of  car  and  body 
manufacturing  in  the  United  States  and  Canada. 

The  acute  financial  pressure  of  1921  had  stirred  the  Cor- 
poration to  another  reform  of  lasting  consequence  both  to 
itself  and  to  industry  at  large.  This  was  the  better  mobiliza- 
tion of  its  cash  resources  through  the  use  of  the  fiscal  trans- 
fer machinery  which  had  been  set  up  by  the  Federal  Reserve 
system.  In  October,  1920,  General  Motors  owed  to  banks 
$82,700,000.  The  strides  made  by  General  Motors  in  ten 
years  from  1910  to  1920  can  be  measured  by  its  borrowing 
power.  In  the  former  year  it  had  to  mortgage  all  its 
properties  to  borrow  $15,000,000;  in  1920  it  could  borrow 
more  than  five  times  this  sum  without  recourse  to  unusual 
expedients.  Yet  during  this  stringency  many  of  the  divisions 
had  more  money  than  they  needed.  Clearly,  one  reform  im- 
mediately necessary  was  the  pooling  of  financial  resources. 
This  was  accomplished  in  a  way  which  has  historical  inter- 
est, as  it  was  the  first  occasion  in  which  the  machinery  of 
the  Federal  Reserve  system  was  used  to  facilitate  the  fund- 
transfers  of  a  large  corporation  active  over  the  whole 
United  States,  and  the  plan  so  set  going  has  been  studied 
and  adopted  in  principle  by  many  other  corporations. 

There  were  two  elements  in  the  problem.  One  was  the 
rigidity  of  General  Motors  cash  under  divisional  control, 
which  forced  Corporation  borrowing  when  division  funds 
were  tied  up  by  managers  most  concerned  with  being  on 
the  safe  side  in  their  own  operations;  the  other  was  the 
time  involved  in  transferring  funds  from  city  to  city  and 
from  plant  to  plant,  involving  a  "float"  of  ten  million 

202  The  Turning  Wheel 

dollars  at  a  time  when  every  dollar  could  be  used  to  ad- 
vantage. Furthermore,  the  Federal  Reserve  system,  hav- 
ing established  means  of  practically  instantaneous  transfer 
by  telegraph,  desired  to  have  those  facilities  tested  in  use. 

Three  plans  were  submitted  by  General  Motors  to  the 
Federal  Reserve  officers,  one  of  which  was  accepted  as  work- 
able. It  involved  the  automatic  transfer  of  General  Motors 
balances  from  its  banks  of  deposit  whenever  the  maximum 
agreed  deposit  to  be  retained  by  that  bank  had  been  ex- 
ceeded. These  remittances  accumulated  in  eleven  large  banks 
as  central  reservoirs.  In  place  of  slow  remittances  by  mail, 
telegraphic  transfers  shifted  funds  almost  instantly. 

This  change  involved  visits  to  banks  all  over  the  country 
and  many  consultations  with  division  executives  to  convert 
them  to  the  idea  of  central  financial  control.  As  a  means  of 
meeting  their  natural  concern  to  have  abundant  working 
capital  promptly  when  needed,  a  system  of  disbursing  funds 
to  divisions  upon  requisitions  was  set  up  which  operated  as 
swiftly  as  the  inflow. 

As  the  plan  became  effective  over  the  entire  country, 
with  all  divisions  and  their  banks  cooperating  through  the 
Federal  Reserve  system,  it  was  seen  to  have  decisive  bene- 
fits for  all  concerned.  The  Corporation  benefited  by  reducing 
its  "float"  from  $10,000,000  to  $4,000,000,  and  also  by  in- 
creasing its  potential  borrowing  power  from  $82,700,000 
to  more  than  $100,000,000.  The  banks  cooperating  in  the 
plan  benefited  by  having  more  stable  General  Motors  de- 
posits, and  by  having  the  interest  rate  on  those  deposits 
uniform  for  the  entire  country  for  several  years  after  the 
plan  went  into  effect.  They  were  able  to  use  General 
Motors  deposits  to  better  advantage  than  formerly.  The 
Federal  Reserve  system  benefited  by  demonstrating  to  the 
industrial  world  the  efficiency  of  its  service,  the  demonstra- 
tion being  so  complete  that  many  other  large  industries 
studied  the  plan  and  adapted  it  to  their  needs. 

The  financial  stress  of  the  post-war  era  soon  passed.  By 
June  30,  1922,  the  Corporation  was  out  of  debt,  and  for 
the  balance  of  that  year  carried  no  bank  loans,  yet  its  cash 
had  been  so  mobilized  that  it  had  a  large  potential  borrow- 
ing capacity. 

New  Era  Under  President  du  Pont    203 

The  Corporation  marched  out  of  the  post-war  depression 
on  a  pair  of  seven-league  boots.  One  of  these  was  the  in- 
ternal reorganization  already  discussed.  The  other  was  the 
fruit  of  an  energetic  development  of  automobiles  partici- 
pated in  by  many  companies  but  in  which  General  Motors 
played  no  small  part  through  the  activities  of  its  research 
department  and  those  of  affiliated  companies.  These  im- 
provements induced  enough  buying  to  make  1922  notable 
for  the  largest  volume  of  business  in  units  to  date.  Two 
years  after  General  Motors  had  approached  bottom  in 
1921  it  was  again  riding  the  crest  in  1923. 

Whereas  in  1921  the  Corporation  lost  $38,680,770 — the 
only  deficit  recorded  in  the  history  of  General  Motors, 
yet  the  following  year  saw  a  complete  reversal  with 
$54,474,493  net  income  available  for  dividends.  Dividends 
were  paid  at  the  rate  of  $i  a  share  through  1921,  but  the 
quarterly  dividend  of  25  cents  due  February  i,  1922,  was 
passed  as  a  matter  of  precaution.  Prompt  recovery,  how- 
ever, permitted  the  payment  of  a  special  50  cents  dividend 
in  December.  During  the  1921  slump  the  average  number 
of  employees  decreased  by  35,000  but  1922,  with  65,345  on 
the  pay  roll  that  year,  saw  the  beginning  of  another  up- 
ward swing  in  employment. 

Among  the  timely  acts  of  the  period  were : 

Sheridan  at  Muncie,  Indiana,  and  Scripps-Booth  at  De- 
troit, were  discontinued.  During  its  short  life  Sheridan 
was  produced  at  the  former  Interstate  plant. 

The  Samson  tractor  plants  at  Janesville,  Wisconsin,  were 
switched  to  automobile  production. 

General  Motors  Building  Corporation  was  formed  to 
hold  and  operate  the  $20,000,000  office  building  in 

Saginaw  Malleable  Iron  Company  was  acquired. 

The  outstanding  shares  of  the  Klaxon  Company  were 
acquired  by  exchange. 

The  Janesville  Electric  Company  was  sold  to  Halsey, 
Stuart  &  Company,  acting  for  power  interests. 

Modern  Housing  Corporation  shares  were  reduced  from 
17,500  to  1,750,  $100  par. 

204  The  Turning  Wheel 

The  Corporation  subscribed  for  8,000  shares  of  the  Gen- 
eral Motors  Acceptance  Corporation  at  $125  a  share, 
in  the  sum  of  $1,000,000. 

Another  sale  of  this  period,  indicative  of  the  Corpora- 
tion's efforts  to  forsake  the  real  estate  and  home-building 
field  where  possible  without  distress  to  employees,  was  the 
sale  by  Harrison  Radiator  of  875  shares  in  the  Lockport 
Homes  Company. 

Perhaps  more  significant  for  the  Corporation  than  any 
other  activity  of  the  period  was  the  drive  which  began  in 
1921  to  improve  the  quality  of  its  cars.  Buick  and  Cadillac 
were  in  no  need  of  overhauling,  but  the  low-priced  cars — 
Chevrolet,  Oldsmobile,  and  Oakland — revealed  weaknesses 
which  flowed  naturally  from  the  post-war  conditions.  Then 
the  cry  had  been  for  more  and  more  production,  with  the 
result  that  engineering  improvements  had  been  postponed 
or  overlooked  entirely.  As  trade  slackened,  weak  mechani- 
cal units  began  to  affect  both  sales  and  reputation.  One  by 
one  these  problems  were  grappled  with  firmly.  Under 
President  du  Pont  began  the  long  struggle  to  rehabilitate 
Chevrolet  and  establish  it  as  the  Corporation's  leader  in 
quantity  production  and  earnings,  which  has  finally  made 
that  subsidiary  the  world's  leader  in  the  low-priced  field. 
Oldsmobile  and  Oakland,  in  their  respective  price  ranges, 
were  put  under  similar  treatment.  This  farsighted  policy 
proved  immensely  beneficial  in  after-years,  bringing  the 
Corporation  to  new  levels  of  earnings  and  efficiency.  In- 
deed, it  may  be  held  as  the  chief  determining  factor  in  lift- 
ing the  Corporation  to  the  impressive  totals  it  reached  from 
1925  onward.  Moreover,  the  lessons  learned  and  remedies 
applied  from  1920  to  1923  were  to  prove  invaluable  in  the 
greater  stress  of  1930  to  1933. 

On  May  10,  1923,  Pierre  S.  du  Pont  retired  as  president. 
The  two  and  a  half  years  of  Mr.  du  Pont's  presidency  saw 
the  Corporation  rise  swiftly  from  a  perilous  position  to  new 
levels  of  profits  and  financial  stability.  Dead  wood  had  been 
cut  away,  and  the  weak  properties  brought  to  increased 
efficiency.  One  by  one  the  Corporation's  great  producers 
had  been  taken  in  hand,  tuned  up,  and  placed  in  a  position 

New  Era  Under  President  du  Pont    205 

of  market  leadership.  Progress  had  been  made  toward 
integrating  a  key  control  at  headquarters.  This  eased  inter- 
plant  relations  without  reducing  too  greatly  the  responsibili- 
ties of  plant  managers,  whose  interest  was  to  be  further 
roused  by  the  creation  of  the  Managers'  Securities  Com- 
pany a  little  later.  Employee  morale  had  been  achieved  by 
the  maintenance  of  high  wages,  generous  bonuses,  and  the 
highly  successful  conclusion  of  the  first  Employee  Savings 
Fund  program. 

With  the  Corporation  in  this  favorable  condition,  Presi- 
dent du  Pont,  certain  that  the  situation  he  went  in  to 
remedy  had  been  fully  cured,  laid  down  the  responsibilities 
of  the  presidency  to  return  to  his  other  large  affairs.  He 
was  to  remain  chairman  of  the  board  for  six  years  more. 
It  is  not  too  much  praise  to  say  that  he  saved  General 
Motors  by  taking  the  helm  in  bad  weather  and  effecting 
such  reforms  that  it  could  not  fail  to  reap  the  rewards  of 
many  of  the  policies  he  formulated.  The  long-range  policies 
and  forward  views  which  Mr.  du  Pont  took  are  still  effec- 
tive in  Corporation  thought  and  practice,  and  will  continue 
to  be  influential  there  for  many  years  to  come.  On  leaving 
the  presidency  he  attributed  a  large  measure  of  the  Cor- 
poration's successful  development  to  Mr.  Alfred  P.  Sloan, 
Jr.,  vice-president  in  charge  of  operations,  who  succeeded 
him  in  office. 

Mr.  Sloan  entered  the  Corporation  as  a  director  on 
November  7,  1918,  incident  to  the  merging  of  United 
Motors,  of  which  he  had  been  president,  and  at  first  had 
charge  of  the  operation  of  the  United  Motors  group.  With 
Mr.  Durant  he  had  been  an  important  figure  in  the  creation 
of  United  Motors,  bringing  into  that  organization  the 
Hyatt  Roller  Bearing  Company,  with  which  he  had  long 
been  associated.  Combining  technical  training  with  executive 
experience,  he  was  widely  known  throughout  industrial 
America  even  before  he  assumed  a  high  place  in  General 
Motors  councils,  and  this  acquaintanceship  later  brought 
into  the  General  Motors  family  several  of  its  present  units. 

That  Mr.  Sloan  also  possessed  sales  insight  and  had  been 
a  force  in  working  out  the  coordinating  reforms  described 
in  this  chapter  may  be  gathered  from  a  tribute  reported 


President,  General  Motors  Corporation,  1923- 


New  Era  Under  President  du  Pont    207 

by  B.  C.  Forbes  in  the  New  York  American,  September  21, 

When  he  was  selected  president,  in  1923,  to  succeed  Pierre  S.  du 
Pont,  the  latter  made  this  public  announcement:  "The  greater 
part  of  the  successful  development  of  the  Corporation's  operations 
and  building  up  of  a  strong  manufacturing  and  sales  organization 
is  due  to  Mr.  Sloan." 

As  General  Motors  integrated  its  policies  and  undertook 
a  systematic  supervision  of  its  extended  operations  under 
Mr.  Sloan  as  vice-president  in  charge  of  operations,  he 
proved  his  fitness  for  the  higher  office  so  well  that,  when 
Mr.  du  Pont  laid  down  the  reins,  there  was  never  any  ques- 
tion who  would  be  chosen  to  succeed  him  as  president.  In 
him  the  Corporation  secured  an  operating  head  possessing 
a  combination  of  technical  training,  executive  experience, 
and  financial  sense. 

By  1923  General  Motors  had  gained  an  important  part 
of  a  trade  already  of  gigantic  proportions  and  destined  to 
grow  to  even  greater  heights.  America  was  just  beginning 
to  realize  what  the  motor  car  meant  to  it  economically  and 
socially.  The  magnitude  of  the  ever-growing  industry  is 
revealed  in  these  statistics  drawn  from  the  1923  census  of 
manufactures : 

Three  hundred  and  fifty-one  factories  were  operated  by  the  automo- 
bile industry  in  the  United  States  and  the  District  of  Columbia 
— 54  being  in  the  state  of  Michigan. 

More  than  318,000  persons  were  directly  employed  in  the  manu- 
facture of  vehicles  in  that  year  and  3,105,000  were  benefited  in- 
directly by  the  industry. 

A  billion  dollars  was  being  spent  on  highways  and  more  than 
$142,000,000  in  the  transportation  by  rail  of  completed  vehicles. 

Eighty-five  percent  of  the  gasoline  consumed  in  the  United 
States  during  that  year  was  used  in  cars  and  trucks. 

More  than  10  percent  of  the  products  of  the  steel  and  iron 
industry  were  used  in  the  production  of  motor  cars  or  of  their 
parts  and  accessories. 

One  hundred  and  sixty  establishments  were  engaged  in  the 
manufacture  of  tires  and  inner  tubes  while  a  total  of  528  manu- 
factured rubber  products. 


The  Turning  Wheel 

Of  the  thriving  automotive  trade  General  Motors  al- 
ready enjoyed  a  large  share.  After  fifteen  years  of  growth, 
punctuated  by  two  stressful  periods,  General  Motors  in 
1923  had  reached  unquestioned  financial  stability,  had  dis- 
covered the  formula  by  which  decentralized  operations 
could  be  correlated  and  controlled  within  limits  of  efficiency, 
and  had  acquired  the  good-will  of  millions  of  satisfied 

Opel  Six  at  Shanghai,  China 

Chapter   XV 


FTER  the  initial  speed  of  accumulations  had  been 
checked  and  balanced  by  the  banker  reorganization  of 
1910-15,  General  Motors  expansion  came  from  two 
sources.  By  far  the  most  impressive  elements  in  the  growth 
of  the  Corporation  since  1923  have  been  written  into  the 
record  by  the  internal  growth  of  various  divisions,  chiefly 
the  great  car  divisions  and  the  accessory  divisions  supply- 
ing them,  accounts  of  which  will  be  found  elsewhere  under 
divisional  heads.  Another  source  of  growth  has  been  the 
purchase  and  adaptation  of  manufacturing  units  and  service 
organizations  which  it  seemed  eminently  desirable  and  nec- 
essary to  control  in  the  interest  of  industrial  competence. 

Strong  reasons  began  to  develop  soon  after  1923  im- 
pelling the  Corporation  to  fortify  itself  wherever  possible 
for  a  future  which  obviously  would  be  considerably  different 
from  its  past.  Evidence  began  to  accumulate  that  the  in- 
dustry as  a  whole  was  approaching  stability.  The  phenom- 
enal popularity  of  the  motoi*  car  in  its  early  stages  had 
provided  such  large  profits  that  many  errors  of  judgment 
had  been  written  off  almost  without  notice.  That  era  of 
"easy  come,  easy  go"  had  passed,  and  with  its  passing  the 
business  of  manufacturing  motor  cars  became  concentrated 
in  fewer  hands. 

This  "sweating-out"  process  had  been  going  on  all 
through  the  life  of  General  Motors,  and  had  in  fact  threat- 
ened various  of  its  units  at  one  time  or  another.  The  more 


210  The  Turning  Wheel 

than  300  manufacturers  of  1908  had  been  reduced  to  189 
by  1914  and  to  143  by  1923;  these  figures  including  pro- 
motions and  other  short-lived  efforts.  Of  these  hundreds, 
twenty-five  manufacturing  units  would  do  more  than  98  per- 
cent of  the  business  in  1931. 

The  continued  progress  of  the  leaders  created  the  im- 
pression that  the  entire  industry  was  proceeding  at  the 
earlier  rate  of  growth,  whereas  the  truth  was,  as  Mr.  Sloan 
told  the  automobile  editors  in  his  Proving  Ground  address 
in  1927,  in  discussing  the  so-called  saturation  point,  that 
"The  industry  has  not  grown  much  during  the  past  three  or 
four  years.  It  is  practically  stabilized  at  the  present  [1927]. 
What  has  taken  place  is  a  shift  from  one  manufacturer  to 

The  trend  from  1923  to  1927  meant  a  basic  shift  of  the 
industry's  attitude  to  the  market.  Henceforth  the  motor 
cars  would  have  to  be  sold,  instead  of  merely  demonstrated. 
They  must  be  advertised  more  and  serviced  better.  Research 
and  improved  methods  of  manufacturing  would  have  to  be 
constantly  speeded  up  to  produce  better  and  better  cars  for 
a  market  ever  growing  more  sternly  competitive.  Precision 
methods,  long  applied  in  factory  production,  were  equally 
needed  in  other  branches  of  the  trade — in  the  calculation 
of  logical  production  programs,  in  the  accounting  systems 
of  dealers,  etc.  The  industry  had  come  of  age  and,  with 
maturity,  competition  brought  new  responsibilities  for 
management.  Such  increase  in  volume  as  developed  would 
have  to  come  from  three  sources :  replacements,  population 
growth,  and  the  increased  use  of  automobiles.  Moreover, 
the  share  of  business  received  by  any  producer  would  have 
to  be  secured  by  hard  work  and  careful  planning  rather 
than  through  luck,  boldness,  or  blind  reliance  on  general 

Consequently,  it  was  time  to  insure  unquestioned  control 
of  certain  essential  supplies  and  to  adopt,  with  relation  to 
those  sources  once  they  were  in  hand,  such  improvements  in 
their  processes  as  would  bring  their  goods  into  the  Cor- 
poration's productive  cycle  as  efficiently  as  possible. 

A  number  of  these  additions  merely  registered  the  Cor- 
poration's completion  of  ownership  in  properties  partly 

Rounding  Out  General  Motors       211 

owned  before  and  already  an  essential  part  of  the  pro- 
duction chain.  In  this  category  was  Brown-Lipe-Chapin 
Company  of  Syracuse,  New  York,  which  had  been  making 
differentials  for  General  Motors  cars  almost  from  the 
latter's  birth,  and  in  which  General  Motors  had  been  in- 
fluential for  years  by  reason  of  a  large  stock  ownership.  On 
December  19,  1922,  the  famous  Syracuse  company  became 
a  completely  owned  division  of  General  Motors. 

Armstrong  Spring  Company  of  Flint,  though  under  vari- 
ous corporate  ownerships  during  the  period,  had  been 
making  springs  for  General  Motors  for  many  years,  work- 
ing closely  with  the  chief  car  divisions.  It  was  purchased  by 
the  Corporation  in  December,  1923,  becoming  a  wholly 
owned  division. 

In  the  field,  perhaps  the  outstanding  development  of  1924 
was  the  purchase  and  initial  improvement  of  the  Proving 
Ground  near  Milford,  Michigan.  Within  easy  reach  of  the 
Corporation's  automobile  plants  at  Detroit,  Pontiac,  Flint, 
and  Lansing,  the  site  was  selected  after  an  intensive  search 
for  a  tract  where  surfaces  and  contours  would  provide  the 
greatest  variety  of  tests  for  motor  cars.  Here  were  heavy 
grades,  sand  and  gravel  hills,  marshy  lanes,  and  muddy 
bogs.  Since  the  purchase,  concrete  and  gravel  roads,  and 
a  wide  range  of  other  road  surfaces  have  been  added  and 
shops  erected,  where  cars  are  taken  down  and  examined 
after  being  put  through  their  paces  on  long,  stiff  journeys 
over  these  varied  highways.  At  the  Proving  Ground,  which 
is  really  a  great  outdoor  laboratory,  all  General  Motors 
models  are  tested  with  the  utmost  rigor  before  they  are 
placed  in  production  by  the  various  car  divisions. 

In  the  first  year  of  General  Motors'  history,  W.  C.  Durant 
used  to  tell  his  racing  and  test  pilots  to  drive  until  their  cars 
broke  down  under  the  strain,  in  an  effort  to  locate  weak- 
nesses and  indicate  where  improvements  should  be  made. 
Now,  sixteen  years  later,  this  idea  materialized  in  a  mam- 
moth undertaking  in  which  that  exacting  work  could  go  on 
under  scientific  supervision,  as  part  of  a  broad  research 
program.  The  Proving  Ground  is  a  large-scale  enterprise 
in  fact-finding  for  the  protection  of  the  buying  public. 

212  The  Turning  Wheel 

Into  the  corporation  field  in  1924  also  came  the  new 
Ethyl  Gasoline  Corporation  to  market  the  "knockless"  fuel 
which  General  Motors  chemists  had  evolved  through  years 
of  alert  and  adventurous  research.  The  story  of  Ethyl  will 
be  told  in  detail  elsewhere;1  it  is  one  of  the  characteristic 
triumphs  of  the  open  mind  in  industrial  research.  To  market 
this  new  fuel  a  $5,000,000  corporation  was  formed,  and 
$1,150,000  was  subscribed  in  1924,  with  Standard  Oil  of 
New  Jersey  and  General  Motors  each  having  a  50  percent 

Fisher  Body,  with  large  earnings  and  the  prospect  of 
more,  expanded  its  capital  stock  to  2,400,000  shares  of  $25 
par  value  to  take  the  place  of  600,000  shares  outstanding. 
Shortly  after,  Fisher  began,  with  the  acquisition  of  Fleet- 
wood  Corporation,  an  important  growth  cycle  of  its  own, 
narrated  in  Chapter  xx:  "Body  by  Fisher." 

Negotiations  had  been  in  progress  for  some  time  with 
the  Hertz  interests  of  Chicago  looking  toward  the  acquisi- 
tion of  an  interest  in  the  Yellow  Cab  Manufacturing  Com- 
pany of  Chicago.  On  August  13,  1925,  the  directors 
approved  the  offer  of  that  company  relative  to  the  transfer 
of  the  General  Motors  Truck  Division  to  a  new  company, 
the  Yellow  Truck  &  Coach  Manufacturing  Company,  a 
holding  company  in  which  General  Motors  Corporation  ac- 
quired a  majority  interest.  In  addition  to  General  Motors 
Truck,  with  large  plants  at  Pontiac,  Yellow  Truck  &  Coach 
Manufacturing  Company  owns  all  or  part  of  several  other 

October  21,  1925,  marks  the  proposal  by  Vauxhall 
Motors,  Ltd.,  of  Luton,  England,  of  a  plan  whereby  Gen- 
eral Motors  entered  the  field  of  British  automobile  manu- 
facture under  excellent  auspices.3  This  plan,  which  was 
consummated  on  November  24th,  required  a  total  outlay 
by  General  Motors  of  £510,000,  or  roughly  $2,500,000  at 
par  of  exchange,  for  which  the  Corporation  secured  a  con- 
trolling interest  in  an  established  British  company  with  a 
possible  production  of  25,000  cars  a  year.  Since  the 

*See  Chap.  XIX:  "Research:  the  March  of  the  Open  Mind." 

*See  Chap.  XXII:  "Commercial  Vehicles." 

3See  Chap.  XVIII:  "General  Motors  Across  the  Seas." 

Rounding  Out  General  Motors       213 

McKenna  duties  increased  the  tariff  on  American  cars  enter- 
ing British  markets,  and  preferential  duties  were  in  force  in 
other  parts  of  the  Empire,  the  advantages  of  this  coalition 
have  been  amply  manifested. 

Another  expansion  of  General  Motors  Acceptance  Cor- 
poration capital  occurred  in  December,  the  Corporation 
subscribing  for  45,000  shares  of  GMAC  stock  at  $125  a 
share,  or  $5,625,000.  Instalment  sales  had  grown  tremen- 
dously in  volume  with  the  growing  confidence  of  the 
country,  and  the  country  was  approaching  the  point  at 
which  more  than  half  the  automobile  output  would  be 
bought  on  credit. 

General  Exchange  Insurance  Corporation,  with  a  capital 
of  $500,000  and  surplus  of  $1,000,000,  was  formed  by 
General  Motors  Corporation  to  handle  the  vast  insurance 
business  arising  through  sales  financed  by  General  Motors 
Acceptance  Corporation.  The  timeliness  of  this  innovation 
was  soon  demonstrated,  for  within  two  years  GEIC  made 
profits  of  $676,000.* 

After  making  a  step  toward  retrenchment  by  author- 
izing the  liquidation  of  the  Lancaster  Steel  Products 
Company  in  1926,  the  directors  authorized  two  other  large 
investments.  Yellow  Truck  &  Coach  Manufacturing  Com- 
pany, in  order  to  provide  for  expansion  of  its  operations, 
sold  additional  capital  stock,  for  the  proceeds  amounting  to 
$14,000,000.  General  Motors  underwrote  the  entire  issue 
and  secured  its  pro  rata  share.  The  other  was  the  inaugura- 
tion of  a  plan  to  buy  up  to  $35,000,000  worth  of  Common 
stock  before  the  close  of  1930  for  the  second  Managers 
Securities  Company. 

Following  this  important  move  the  Fisher  group  was  also 
greatly  expanded  by  the  construction  and  acquisition  of  new 
properties  and  companies  making  necessary  supplies — 
among  them  the  Flint  plant,  the  largest  in  the  Fisher  en- 
semble. Also,  the  Fisher  structure  was  simplified  by  the 
purchase  of  the  affiliated  Ohio  company.  The  "Golden 

*A  full  account  of  General  Exchange  Corporation  and  its  successor,  Gen- 
eral Exchange  Insurance  Corporation,  will  be  found  in  Chap.  XXVII: 
"Financing  and  Insuring  the  Buyer." 

214  The  Turning  Wheel 

'Twenties"  were  busy  years  for  Fisher,  with  four  incorpora- 
tions or  acquisitions  in  1923,  two  in  1924,  two  in  1925,  five 
in  1926,  two  in  1928,  and  one  in  1929.  The  complete 
Fisher  set-up  will  be  found  in  Chapter  xx. 

August,  1926,  marked  the  merger  of  selling  efforts  on 
certain  important  lines  of  the  Corporation's  electrical 
products  in  the  formation  of  the  Delco-Remy  Corporation 
of  Delaware,  which  was  followed  presently  by  the  transfer 
of  the  starting,  lighting,  and  ignition  business  of  Delco, 
from  Dayton  to  Anderson,  Indiana,  the  seat  of  the  present 
Delco-Remy  division. 

On  November  n,  1926,  General  Motors  Acceptance 
Corporation  stock  was  increased  to  $25,000,000,  since  it 
was  clear  that  the  country  had  overcome  its  hesitation  of 
the  spring  and  was  confidently  going  forward,  giving  every 
promise  of  availing  itself  of  time-payment  plans  to  the  full 
in  automobile  purchases.  Another  $10,000,000  increase  in 
GMAC  stock  was  ordered  in  June,  1927,  and  later  GMAC 
acquired  the  General  Exchange  Insurance  Corporation  at 
its  net  asset  value  as  of  June  30,  $2,176,702,  the  original 
cost  to  the  Corporation  having  been  only  $1,500,000. 

During  these  busy  and  prosperous  years  interests  were 
also  acquired  in  Bendix  Aviation  of  Chicago;  Fokker  Air- 
craft Corporation  of  America,  the  latter  becoming  the  Gen- 
eral Aviation  Corporation;  Winton  Engine  of  Cleveland, 
Ohio,  makers  of  marine  and  stationary  engines  for  rail- 
way use;  McKinnon  Industries  of  St.  Catharines,  Ontario; 
the  Guide  Lamp  Company  of  Cleveland,  Ohio;  North  East 
Electric  of  Rochester,  New  York;  and  others. 

All  through  this  period  also  there  was  an  unceasing  flow 
of  changes  in  plant  utilization.  The  union  of  Delco  and 
Remy  at  Anderson,  Indiana,  has  resulted  in  a  large  industry, 
although  not  all  Delco  activities  were  moved.  There  re- 
mains in  Dayton  the  Delco  Products  Corporation,  making 
Lovejoy  Hydraulic  shock  absorbers,  small  motors,  and  a 
wide  range  of  other  appliances.  North  East  Electric  at 
Rochester,  New  York,  bought  in  1929,  soon  became  Delco 
Appliance  Corporation,  and  to  it  were  transferred  the 
Delco  Light  business  and  other  electrical  lines — chiefly  in 
the  household  appliance  and  radio  fields.  This  shift  of 

Rounding  Out  General  Motors       215 

functions  toward  a  more  efficient  alignment,  both  geograph- 
ically and  technically,  has  become  more  marked  since  the 
year  1930. 

General  Motors  thus  has  become  a  large  producer  of 
motor-driven  household  equipment.  The  Frigidaire  Cor- 
poration manufactures  electric  refrigerators,  beverage  and 
water  coolers,  refrigerating  apparatus  for  households, 
hotels,  restaurants,  and  apartments,  air  conditioning  equip- 
ment for  homes,  offices,  shops  and  railway  cars.  Delco 
Appliance  Corporation  makes  electric  light  and  power 
plants  (Delco  Light),  electric  motors  and  blowers,  gas- 
producing  units  (Delcogas),  and  Delco  oil  burners,  vacuum 
cleaners  and  water  pumps,  and  electric  fans.  Small  motors 
are  made  by  Delco  Products  at  Dayton.  Gas  refrigerators 
for  household  and  apartment  use  are  produced  by  the 
Faraday  Refrigerator  Corporation,  also  at  Dayton. 

The  process  of  growth  by  purchase  and  development  still 
goes  on,  though  purchases  of  other  properties  are  naturally 
at  a  reduced  rate.  A  recent  acquisition,  in  1932,  was  the 
Packard  Electric  Corporation  of  Warren,  Ohio,  manu- 
facturers of  automotive  cable  products.  The  name  has  early 
connections  with  the  industry,  as  the  Packard  car  originated 
there.  It  will  be  noted  that  the  Corporation  in  its  twenty- 
five  years  of  history  has  withdrawn  from  several  activities 
for  substantial  reasons,  and  the  motives  making  for  aban- 
donment have,  of  course,  been  especially  strong  from  1930 
to  1933.  The  most  important  of  these  recent  changes  was 
the  removal  of  Muncie  Products  activities  from  Muncie, 
Indiana,  and  the  transfer  of  Brown-Lipe-Chapin  activities 
to  Buick  and  other  plants. 

With  the  exception  of  1918,  the  war  year  in  which  ma- 
terials could  not  be  secured  to  satisfy  the  public  demand, 
and  in  1921,  when  the  post-war  slump  reduced  production 
by  one  quarter,  the  automobile  industry  had  marched 
steadily  forward  in  the  quantity  and  value  of  its  products 
for  a  quarter  of  a  century.  In  the  ten  years  from  1912  to 
1922,  the  annual  production  had  risen  from  378,000  units 
with  a  wholesale  value  of  $378,000,000  to  2,646,229  units 
with  a  wholesale  value  of  $1,793,022,708.  In  1923,  the 
totals  bulged  to  4,180,450,  valued  at  $2,592,033,428. 

216  The  Turning  Wheel 

A  definite  periodicity  marks  automobile  production 
through  the  whole  decade  of  the  'twenties.  The  trade  began 
a  succession  of  three-year  cycles,  apparently  as  a  result  of 
its  own  circumstances  and  enthusiasms,  as  follows : 

1921  Black  year  1924     Black  year  1927     Black  year 

1922  Goodyear  1925     Goodyear  1928     Goodyear 

1923  Banner  year        1926     Banner  year         1929     Banner  year 

The  descriptions  are,  of  course,  merely  relative,  as  new 
heights  were  being  scaled  all  through  the  period,  so  that  the 
good  year  of  1925  produced  a  larger  volume  than  the 
banner  year  of  1923,  and  the  good  year  of  1928  brought 
more  business  than  the  banner  year  of  1926.  The  figures 
on  units  manufactured,  in  the  United  States  and  Canada, 
and  their  wholesale  value  for  the  period  are: 

Units  Value 

1921  1,682,365        $1,261,666,550 

1922  2,646,229         1,793,022,708 

1923  4,180,450        2,592,033,428 

1924  3,737,786         2,367,413,015 

1925  4,427,800         3,015,163,562 

1926  4,505,661         3,214,817,491 

1927  3,580,380        2,700,705,743 

1928  4,601,141         3,162,798,880 

1929  5,621,715         3,576,645,881 

Owing  to  conditions  which  may  be  considered  special, 
General  Motors  entirely  escaped  the  1927  reduction  in 
volume  common  to  the  industry.  Net  sales  for  the  Corpora- 
tion rose  by  more  than  $200,000,000  over  the  1926  figure, 
reaching  $1,269,519,673,  or,  on  the  basis  of  units  sold, 
nearly  44  percent  of  the  entire  output  for  the  United  States 
and  Canada  in  1927. 

The  trend  is  upward  but  not  constant;  after  every  banner 
year  as  noted,  there  is  a  dip,  and  then  begins  a  two-year 
rise  to  new  highs.  To  those  aware  of  this  swing  of  the 
pendulum  it  seemed  likely  that  1926  would  be  another 
banner  year,  unless  there  should  be  a  general  slackening  of 
trade.  For  five  years  there  had  been  a  steady  appreciation 
in  urban  real  estate  and  security  values,  but  farm  produce 
had  never  recovered  fully  from  the  post-war  price  slump, 

Rounding  Out  General  Motors       217 

and  the  condition  of  the  farmers  could  not  be  considered 
good.  The  disparity  between  the  farmer's  dollar  and  the 
urban  dollar  was  marked  enough  to  cause  some  disquietude; 
only  in  automobiles  and  tires,  owing  to  manufacturing  im- 
provements, could  the  farmer  buy  to  advantage  compared 
with  the  pre-war  ratio.  Moreover,  while  automobile  prices 
had  dropped  steadily  from  1912  to  1917,  and  again  from 
the  war  peak  of  1918  to  1924,  they  had  shown  a  rising 
tendency  in  1924  and  1925.  Students  of  automobile  eco- 
nomics were  asking  themselves  whether  the  upward  swing 
could  continue;  the  Stock  Exchange  drop  of  March,  1926, 
enough  to  call  forth  a  reassuring  interview  from  President 
Coolidge,  indicated  a  gathering  tension. 

The  country,  however,  gathered  courage  and  went  on. 
The  year  1926  rolled  up  the  record  figures  of  nearly 
$3,215,000,000  in  wholesale  value  of  the  automobile  in- 
dustry's output,  and  the  automobile  cycle  swung  through 
another  three-year  period  to  even  larger  figures. 

Economic  historians  will  be  debating  the  long  continuance 
of  the  prosperity  of  the  1920*8  for  many  years  to  come.  All 
precedents  indicated  that  the  boom  should  have  reached 
its  zenith  before  1929.  Evidently  there  were  new  factors 
in  the  equation.  Among  them  were:  increased  efficiency  in 
industrial  production,  growth  of  export  trade,  the  nation's 
increase  in  gold  holdings,  and  the  wider  distribution  of 
wealth.  Still  another,  of  special  moment  to  the  automobile 
industry,  was  the  enormous  extension  of  instalment  selling. 

The  amazing  totals  of  1928  and  1929  can  only  be  ex- 
plained by  boom  conditions  confounding  all  calculations.  We 
have  seen  how  firmly  Mr.  Sloan,  with  all  available  data  on 
hand,  considered  in  1927  that  the  industry  as  a  whole  was 
approaching  stabilization,  in  which  continued  demand  would 
be  largely  for  replacement  purposes,  with  some  allowance 
for  growth  due  to  increasing  population  and  gain  in 
motor-mindedness.  Yet  in  the  next  two  years  the  automobile 
industry  swept  aside  all  these  conclusions  of  conservatism 
under  the  lash  of  a  demanding  market. 

Chapter   XVI 


HE  early  histories  of  the  four  of  the  five  passenger  car 
divisions  of  General  Motors  have  been  carried  down  in 
previous  chapters  to  the  time  they  joined  General  Motors 
of  New  Jersey,  and  that  of  Pontiac  from  its  origins  in 
Oakland  down  to  the  present  time.  This  chapter  presents 
briefly  the  stories  of  Buick,  Cadillac,  Chevrolet  and  Olds- 
mobile  after  they  were  merged  into  General  Motors. 

These  compressed  histories  necessarily  omit  many  inter- 
esting details  and  pertinent  facts,  as  each  of  the  car 
divisions  is  in  itself  an  important,  large-scale  industrial 
operation  deserving  of  more  extended  treatment.  All  have 
compiled  historical  material  in  considerable  amount,  some 
of  which  has  been  circulated  widely  in  pamphlets  and 
through  press  releases. 


When  Buick  became  the  foundation  stone  of  General 
Motors  in  1908,  it  had  already  won  leadership  in  the 
medium-priced  field,  and  in  volume  of  business  it  ranked 
first  in  the  American  automobile  field.  Ever  since  it  has  been 
one  of  the  chief  pillars  of  Corporation  strength.  From  an 
output  of  only  sixteen  cars  in  1903  Buick  has  reached  a 
total  production  of  more  than  2,500,000  units,  more  than 
half  of  which  are  still  in  operation,  including  models  of 
every  year  except  the  first.  Its  largest  year,  in  unit  sales,  was 
1926,  when  280,009  Buicks  were  sold. 


Passenger  Car  Divisions  219 

During  its  life-span  of  thirty  years  Buick  has  held  closely 
to  the  medium-price  range.  In  only  six  of  those  years  has 
the  average  Buick — the  middle-priced  car  of  all  its  models 
for  the  year — exceeded  $2,000.  Only  one  model  has  been 
sold  below  $1,000.  One  result  of  this  consistent  price 
policy  has  been  the  creation  of  a  very  large  body  of  buyers 
who  continue  to  order  Buicks  year  after  year.  While  many 
makes  of  cars  have  found  new  price  levels  in  the  history 
of  the  industry,  a  few  rising  and  more  dropping  in  the 
scale,  Buick  has  kept  its  original  position,  compensating  the 
customer  as  costs  declined  by  adding  to  the  value  of  the 
product  year  by  year. 

When  Buick  began,  it  was  a  manufacturing  policy,  com- 
mon to  the  entire  industry,  to  sell  a  bare  car  at  a  listed 
price  and  then  furnish,  as  extra  equipment  at  set  prices, 
many  appliances  necessary  to  comfortable  motoring  which 
today's  buyer  looks  upon  as  essential.  For  instance,  the 
famous  Model  F  two-cylinder  Buick  sold  at  $1,250,  F.O.B. 
factory,  but  unless  the  customer  bought  and  paid  for  a  top 
he  would  ride  in  the  rain;  unless  he  bought  lamps  he  would 
ride  only  by  day;  unless  he  bought  a  windshield  he  sat  ex- 
posed to  the  blasts  of  Boreas.  Extra  equipment  lists  often 
included  such  essential  elements  as  tires,  horn,  and  gauges. 
Consequently  a  comparison  of  automobile  prices,  histori- 
cally, means  very  little  until  manufacturers  reached  the  point 
of  selling  their  cars  completely  equipped.  What  one  gets  for 
his  money  is  quite  as  important  as  what  he  pays. 

Through  this  development  from  the  skeleton  car  of  the 
old  days  to  the  fully  equipped  car  of  the  present,  Buick  was 
usually  to  be  found  somewhat  to  the  fore  in  the  matter  of 
shifting  extra  equipment  to  standard  equipment,  rather  than 
following  the  policy  of  pushing  the  price  down  and  keeping 
the  charges  for  extras  up.  For  that  reason  a  year-by-year 
statement  of  additions  to  Buick  equipment  is  an  interesting 
exhibit  of  the  stages  through  which  the  American  automo- 
bile industry  advanced  toward  the  present  practice  of  equip- 
ping a  car  completely. 

In  the  evolution  of  the  automobile,  both  as  a  machine 
and  as  a  style  vehicle,  Buick  has  always  been  consistently 
progressive,  originating  many  improvements  and  applying 

220  The  Turning  Wheel 

others  as  soon  as  they  developed  reliability.  For  that  reason, 
if  one  desires  to  see  the  steps  by  which  the  automobile  has 
reached  its  present  appearance,  he  can  find  some  of  the 
stages  of  that  progress  in  the  comparison  of  Buick  speci- 
fications. One  can  see  the  automobile  growing  through  addi- 
tions like  these:  1903-04,  folding  celluloid  wind-breaker; 
1905-06,  side  curtains;  1907-08,  Presto-lite  headlights; 

1911,  first  closed  car,  a  limousine,  folding  seats  in  tonneau; 

1912,  mohair  top;   1913,  clear  vision  windshield,  electric 
lights,  nickel  trimmings  instead  of  brass;  1914,  first  sedan. 

On  the  mechanical  side  the  progress  can  be  charted  by  a 
few  of  many  thousands  of  transitions:  1903-04,  safety 
cranking  device;  1904-05,  disc  clutch,  steel  drive  shaft; 
1907-08,  aluminum  crankcase,  magneto,  spark  and  gas 
control  sector  on  steering  wheel;  1909-10,  pressed  steel 
frame;  1911,  oil  splash  system;  etc.,  etc. 

Bob  Burman  at  wheel  of  "Old  41"  famous  Buick  racer,  1909 

Buick  pioneered  in  glass  fronts,  fore-doors,  internal  ex- 
panding brakes  and  four-wheel  brakes,  and  in  the  develop- 
ment of  the  rear  axle  assembly  with  differential. 

In  order  to  test  its  cars  at  high  speed,  Buick  built  a  pri- 
vate track  on  its  Flint  property,  where  such  speed  and 
endurance  were  developed  that  its  cars  were  soon  entered  in 
the  more  important  races  and  hill-climbing  contests.  The 
sporting  interest  has  already  been  referred  to  as  develop- 
ing automobile  enthusiasm  in  the  public.  While  amateurs 

Passenger  Car  Divisions  221 

might  start  these  competitive  events,  the  manufacturers, 
noting  both  their  news  value  and  test  value,  provided  the 
competition,  spending  large  sums  to  secure  famous  drivers. 
Buick's  most  famous  racing  team  consisted  of  seven  pilots, 
among  whom  were  four  of  the  first  rank — Bob  Burman, 
Louis  Strang,  and  the  Chevrolet  brothers,  Louis  and  Arthur. 

Among  the  more  famous  events  of  the  many  won  by 
Buick  during  its  first  eight  years  were :  hill  climbs  at  Eagle 
Rock,  Mt.  Washington,  and  Pike's  Peak';  the  Vanderbilt 
Cup  road  race  of  100  miles;  the  French  Grand  Prix;  the 
595-mile  Elgin,  and  the  482-mile  Los  Angeles-Phoenix; 
track  victories  at  Brooklands,  England;  St.  Petersburg, 
Russia;  and  the  Indianapolis  Speedway.  The  Russian  vic- 
tory brought  to  Buick  the  Imperial  trophy. 

At  the  Indianapolis  race  appeared  two  odd  cars,  like  big 
June  bugs,  with  the  name  "Buick"  on  the  side  of  each  body. 
These  two  "Buick  Bugs"  were  piloted  by  Bob  Burman  and 
the  Chevrolets,  Arthur  and  Louis.  In  the  next  two  years 
they  broke  more  records  than  any  other  team.  In  1911  at 
Jacksonville,  Florida,  Bob  Burman  driving  a  "Buick  Bug" 
established  two  straightaway  records  regardless  of  class: 
50  miles  in  35  minutes  and  52.3  seconds,  and  two  days  later, 
20  miles  in  13  minutes  and  11.92  seconds.  Both  records 
stood  for  more  than  ten  years. 

Victories  like  these  were  the  result  of  careful  organiza- 
tion and  training,  but  if  one  retreats  into  the  past  as  far 
as  the  car  which  is  still  affectionately  called  "old  Model  F" 
he  finds  amateurs  at  the  wheel,  and  an  informality  like  that 
of  a  country  fair.  When  his  little  two-cylinder  Buick  first 
won  the  Eagle  Rock  hill  climb,  cutting  the  existing  record 
almost  in  two,  Walter  L.  Marr  was  asked  how  his  small 
motor  could  develop  the  power  to  defeat  much  larger  and 
more  highly  powered  cars.  He  replied,  quickly:  "It's  a 
Valve-in-the-head'  motor."  The  phrase  caught  on  and  has 
been  retained. 

With  the  complete  professionalizing  of  the  sport,  and  the 
evident  trend  toward  specially  designed  racing  cars,  Buick's 
interest  in  racing  ceased  while  its  great  racing  team  was 
still  at  the  top  of  its  success.  Although  the  records  estab- 
lished by  the  non-stock  racing-  cars  of  the  present  are  being 

222  The  Turning  Wheel 

bettered  year  by  year,  some  Buick  records  still  stand  in  the 
stock  classification. 

From  1910  to  1920  Buick  production  rose  from  approxi- 
mately 20,000  cars  to  more  than  120,000  a  year.  Only  three 
of  those  years  show  a  recession  from  the  preceding  one, 
that  of  1911  reflecting  the  conditions  which  brought  on  the 
banker  control  of  General  Motors,  and  that  of  1918  being 
explained  by  the  difficulty  of  securing  material  in  a  war 
year.  During  that  decade  the  closed  car  came  into  its 
own,  each  year  showing  a  larger  percentage  of  production 
until  the  open  car,  except  in  sport  models,  has  become  a 

Mr.  Harry  H.  Bassett  became  president  of  Buick  in 
1919.  His  was  a  personality  which  endeared  him  to  men  of 
all  positions  both  inside  and  outside  the  organization,  his 
interest  in  the  welfare  of  his  workmen  being  particularly 
keen.1  He  had  been  with  the  Remington  Arms  Company 
for  fourteen  years  when,  in  1905,  Mr.  C.  S.  Mott  per- 
suaded him  to  enter  the  Weston-Mott  Company  at  Utica. 
The  Weston-Mott  plant  at  Flint  being  established  in  the 
meantime,  in  the  next  year  Mr.  Bassett  went  there  as 
assistant  factory  manager.  By  1913  he  was  made  general 
manager,  later  also  vice-president.  On  consolidation  of 
Weston-Mott  and  Buick  in  1916  he  became  the  assistant 
general  manager  of  Buick,  the  same  year  it  was  made  a 
division  of  General  Motors.  In  1919  he  became  general 
manager,  also  a  vice-president  of  General  Motors,  and  then 
assumed  the  presidency  of  Buick  Motor  Company.  In  1924 
he  became  a  member  of  General  Motors'  Executive  Com- 

In  Mr.  Bassett's  first  year  with  Buick,  capacity  was  in- 
creased to  750  cars  per  day,  and  in  1924  to  1,200  cars  per 
day.  The  millionth  Buick  appeared  in  1923.  Upon  his  death 
Mr.  E.  T.  Strong,  who  had  been  sales  manager,  became 
president  in  1926  and  was  succeeded  by  Mr.  I.  J.  Reuter  in 
1932.  In  October,  1933,  Mr.  Reuter  resigned  and  was  suc- 
ceeded as  general  manager  by  Harlowe  H.  Curtice,  who 
had  been  president  of  AC  Spark  Plug  Company  since  1929. 

*See  Chap.  XXVIII  for  an  account  of  his  influence  on  General  Motors  In- 
stitute of  Technology,  etc. 

Passenger  Car  Divisions 


In  1928  Buick  Motor  Company  celebrated  its  Silver 
Jubilee,  the  twenty-fifth  anniversary  of  the  organization, 
producing  at  that  time  its  Silver  Jubilee  model. 

During  1933  Buick's  functions  have  been  enlarged  by  the 
addition  of  the  former  Armstrong  Spring  division  of  Flint 
and  the  transfer  to  Flint  from  Syracuse,  New  York,  and 
Muncie,  Indiana,  of  differential  and  transmission  manu- 


In  1909  General  Motors  Company  acquired  the  entire 
Common  capital  stock  of  the  Cadillac  Motor  Car  Com- 
pany consisting  of  $1,500,000,  par  value,  paying  therefor 

Cadillac:  the  first  car  equipped  with  an  electric  self-starter 

$5,169,200  in  General  Motors  Company  Preferred  stock 
and  $500,050  in  cash  or  a  total  of  $5,669,250. 

In  1910  battery  ignition  was  placed  on  Cadillac.  The 
same  year  the  first  "big"  order  for  closed  cars  (150  bodies) 
was  given  to  Fisher  Body  Company.  In  1912  the  first 
electric  self-starter  was  installed  in  Cadillac  as  standard 
equipment,  as  related  in  Chapter  XIX:  "Research:  The 
March  of  the  Open  Mind."  Mr.  C.  F.  Kettering,  the  in- 
ventor of  the  starter,  drove  to  the  opening  of  the  General 

224  The  Turning  Wheel 

Motors  building  at  the  Chicago  Century  of  Progress  Ex- 
position in  1933,  in  one  of  these  1912  Cadillacs.  For  this 
contribution,  Cadillac  in  1912  won  for  the  second  time  the 
Dewar  trophy,  awarded  by  the  Royal  Automobile  Club  of 
London  for  the  greatest  advance  in  automobile  construction 
during  the  preceding  year,  its  first  victory  having  been 
awarded  for  interchangeability  of  parts  five  years  earlier.2 

Cadillac  introduced,  in  1914,  the  9<D-degree  v-type  eight- 
cylinder  engine,  the  first  eight-cylinder  high-speed  automo- 
bile power  plant  built  in  this  country.  This  achievement  of 
Cadillac  was  honored  by  the  Smithsonian  Institution  which 
placed  one  of  the  first  Cadillacs  of  this  type  in  its  museum 
in  Washington.  Every  Cadillac  built  from  1914  to  1927 
was  powered  by  this  same  type  engine.  Even  the  bore  and 
stroke,  piston  displacement  and  S.  A.  E.  horsepower  rating 
remained  the  same.  In  this  period  refinements  in  the  power 
plant  included  thermostatic  carburetion,  the  compensated 
shaft,  and  a  positive  system  of  crankcase  ventilation. 

Other  honors  which  came  to  Cadillac  are  treated  in 
Chapter  xn:  "The  War  Years." 

In  1917  Mr.  Henry  M.  Leland  resigned  as  president.  He 
remained  active  in  business  and  civic  affairs  until  shortly 
before  his  death  in  1932,  at  the  age  of  eighty-nine.  He  was 
succeeded  by  Mr.  R.  H.  Collins,  who  was  president  of 
Cadillac  until  1921,  during  a  period  of  rapid  expansion. 
Mr.  H.  H.  Rice  then  became  president,  remaining  until 
1925  when  Mr.  Laurence  P.  Fisher  assumed  the  position. 

Soon  afterward  Cadillac  began  a  $5,000,000  expansion 
program.  In  1927  the  La  Salle  v-8  was  introduced  to  a 
market  which  absorbed  nearly  60,000  La  Salles  in  the  next 
three  years^  a  sales  record  unparalleled  for  a  new  car  in  its 
price  and  quality  class. 

Both  Cadillac  and  La  Salle  appeared  in  1928  with  non- 
shattering  glass,  the  first  cars  to  leave  factories  with  that 
safeguard.  Later  in  the  year  they  were  also  equipped  with 
the  famous  synchro-mesh  transmission,  in  its  day  a  decided 

Synchro-mesh,  the  silent  gear  shift,  was  brought  to  per- 
fection by  Cadillac.  Some  ten  models  of  this  "silent  shift" 

*See  Chap.  VII:  "Cadillac:  The  Triumph  of  Precision." 

Passenger  Car  Divisions  225 

transmission  were  tried  experimentally  on  twenty-five  cars, 
which  were  driven  1,500,000  miles  on  the  General  Motors 
Proving  Ground.  Synchro-mesh  was  then  introduced  to  the 
public,  on  Cadillac  and  La  Salle  in  1928,  and  later  became 
standard  equipment  for  General  Motors  cars. 

Synchro-mesh  marked  a  step  forward  in  the  direction  of 
safety  of  operation  with  the  driver  in  complete  control  of 
the  car  at  all  times,  since  it  allows  him  to  take  advantage 
of  the  braking  power  of  the  engine  in  either  high  or  second 
gear.  Direct  acceleration,  a  desirable  feature  in  traffic,  is 
also  hastened  by  synchro-mesh.  This  transmission  is  de- 
signed to  eliminate  the  clashing  of  gears  and  provide  silent 
shifting  at  all  car  speeds. 

Synchro-mesh  is  thus  explained  from  the  mechanical 
standpoint : 

The  transmission  consists  basically  of  a  small  friction  clutch  which 
causes  the  two  spinning  members  of  the  gears  to  revolve  at  iden- 
tical speeds.  When  the  driver  moves  the  gear  shift  lever  from  the 
neutral  position  into  second  or  high,  one  or  the  other  of  the  two 
clutches,  actuated  by  the  lever,  is  engaged  long  enough  to  syn- 
chronize the  gears.  Since  the  gears  are  revolving  at  the  same  speed 
they  engage  with  complete  ease  and  without  the  possibility  of 

After  three  years'  experimental  work,  Cadillac  announced 
America's  first  sixteen-cylinder  automobile,  January,  1930. 
Its  favorable  reception  led  to  Cadillac  completing  the 
series  of  multiple  cylinder  power  plants  by  bringing  out  the 
v-12  later  in  the  year.  More  than  450,000  Cadillacs  and 
La  Salles  had  been  produced  by  the  end  of  1932. 

Cadillac's  evolution  has  been  toward  size  and  quality. 
From  the  one-cylinder  engine  which  made  its  early  reputa- 
tion, Cadillac  has  risen  to  sixteen  cylinders  in  its  largest 
models.  Even  its  one-cylinder  engine  was  a  precision  job, 
giving  more  power  than  its  pioneer  competitors  because  of 
closer  machining.  The  degree  of  precision  has  been  in- 
creased steadily,  reaching  a  high  stage  of  refinement.  In  an 
industry  which  as  a  whole  leads  all  others  in  combining  large 
output  with  close  work,  Cadillac  ranks  as  a  leader.  A 
master-set  of  precision  gauge  blocks,  guaranteed  to  be  ac- 
curate to  the  one  millionth  part  of  an  inch,  lies  carefully 

226  The  Turning  Wheel 

guarded  in  a  velvet-lined  case  as  a  talisman  of  measurement 
accuracy  in  the  Cadillac  plant. 

More  than  a  dozen  similar  sets,  accurate  to  three  mil- 
lionths  of  an  inch,  are  regularly  used  in  the  tool  and  gauge 
department  to  check  other  master  gauges.  There  are  more 
than  27,000  Cadillac  and  La  Salle  clearances  which  must  be 
accurate  to  within  one  thousandth  of  an  inch;  there  are 
37,000  that  must  be  accurate  to  less  than  two  one  thou- 
sandths of  an  inch;  there  are  800  operations  carried  out 
with  such  vigilance  as  to  allow  only  one  fourth  to  one  half 
of  one  thousandth  of  an  inch. 

As  one  passes  through  the  Cadillac  plant  he  sees  mate- 
rials being  tested  with  cameras  which  multiply  their  struc- 
ture one  thousand  times;  he  sees  diamond-pointed  weights 
determining  their  mass  hardness;  he  sees  torsion  machines 
and  vibratory  machines  subjecting  them  to  every  kind  of 
strain;  his  eyes  fall  on  row  upon  row  of  scales  and  gauges 
in  the  hands  of  skilled  workers;  he  witnesses  each  individual 
part  of  the  car  both  before  and  after  assembly  being  in- 
spected; and  he  leaves  with  the  feeling  that  he  has  been  in 
a  temple  of  precision  where  quality  dwells. 

Cadillac  now  offers  eight-,  twelve-  and  sixteen-cylinder 
cars  and  La  Salle  on  two  wheel-bases.  Cadillac  v-8  appears 
in  sixteen  body  styles,  Cadillac  v-12  in  sixteen,  while 
Cadillac  v-i6's  are  built  only  to  order  and  limited  to  400 
a  year,  buyers  having  a  practically  unlimited  choice  in  body 
design  and  finish.  La  Salle,  with  eight  cylinders,  is  produced 
in  seven  models. 

Cadillac's  pioneering  achievements  were  summarized 
effectively  in  the  Founders  Section  of  the  Automobile  Trade 
Journal  of  December  i,  1924,  as  follows: 

First  to  produce  a  car  with  parts  sufficiently  standardized  to  be  inter- 

First  to  introduce  a  complete  electrical  system  of  cranking,  light- 
ing and  ignition. 

First  to  develop  and  incorporate  thermostatic  control  of  engine 

First  in  the  United  States  to  adopt  Johansson  gauge  system  of 
fine  measurements. 

Passenger  Car  Divisions  227 

First  to  build  a  truly  high-grade  car  in  quantity  production,  and 
to  sell  at  a  moderate  price. 

First  American  car  to  win  the  international  Dewar  trophy, 
awarded  annually  to  the  automobile  making  the  greatest  engineer- 
ing advance.  Won  twice  by  Cadillac. 

First  in  the  United  States  to  develop  v-type,  high  speed,  high 
efficiency  engine. 

First  in  thermostatically  controlled  carburetion. 

First  to  build  an  inherently  balanced  v-type  eight-cylinder 
engine — the  vibrationless  v-63. 

To  which  might  be  added  at  this  date : 

First  to  build  a  sixteen-cylinder  engine  for  stock  use,  and 
First  to  install  the  silent  synchro-mesh  transmission. 

Cadillac's  record  in  the  technical  history  of  accurate 
craftsmanship  as  applied  to  large  production,  which  is  the 
most  distinctive  feature  of  America's  contribution  to  ma- 
chine practice,  is  unsurpassed  by  any  automobile  manu- 


Chevrolet's  spectacular  entry  into  the  General  Motors 
family  has  been  described.  It  was  then  a  lusty  child,  seven 
years  old,  but  already  giving  evidence  of  gigantic  stature 
to  come. 

The  seal  had  been  set  on  decentralized  operations  by  the 
sale,  in  1916,  of  the  Detroit  property  opposite  the  Ford 
Motor  Company  in  Highland  Park.  If  this,  planned  as  the 
seat  of  a  great  plant,  had  been  used  as  the  site  of  a  great 
central  factory,  as  anticipated,  Chevrolet's  activities 
would  have  been  concentrated  there  instead  of  being  spread 
over  the  country,  with  Chevrolet  manufacturing  going  on  in 
six  American  cities  and  assembly  in  ten. 

Chevrolet  received  its  present  corporate  form  on  Decem- 
ber 24,  1917,  when  it  was  incorporated  in  New  Jersey  as  a 
sales  company  for  $10,000,  all  issued  and  all  owned  by 
General  Motors  Corporation.  Henceforward  Chevrolet 
would  rank  as  a  division  of  General  Motors,  the  largest 
on  the  roster. 


The  Turning  Wheel 

After  General  Motors  absorbed  the  Chevrolet  Motor 
Company  of  Delaware  on  May  2,  1918,  Chevrolet  em- 
barked on  a  policy  of  acquiring  its  affiliates  in  which  local 
capital  had  been  interested.  Chevrolet  Motor  Company  of 
St.  Louis  was  purchased  on  August  ist,  and  Chevrolet 
Motor  Company  of  Canada  on  November  ist.  This  policy 
also  brought  Chevrolet  of  California  under  ownership  in 


Executive  Vice-President,  General  Motors  Corporation 

1920.  Meantime,  assembly  and  sales,  outlets  were  greatly 
expanded.  A  new  assembly  plant  was  built  in  St.  Louis.  As 
evidence  of  the  driving  power  toward  expansion,  500  re- 
tail stores  for  direct  distribution  of  product  to  customer 
were  authorized,  and  of  these  forty-eight  had  been  opened 
by  August  i,  1920.  On  December  22d,  following,  Karl  W. 
Zimmerschied  became  president  of  Chevrolet,  succeeding 
W.  C.  Durant. 

General  Motors  of  Canada  took  over  all  of  Chevrolet's 
Canadian  operations  January  i,  1921.  Various  steps  in  re- 
trenchment were  taken  to  meet  the  adverse  conditions  of 
the  post-war  slump. 

Passenger  Car  Divisions  229 

In  March,  1922,  Mr.  Zimmerschied  retired  and  was  suc- 
ceeded in  authority  by  W.  S.  Knudsen,  who,  however, 
ranked  only  as  vice-president  until  1924.  Mr.  Knudsen's 
administration  has  seen  the  advance  of  Chevrolet  to  first 
place  among  quantity  producers.  Almost  immediately  Chev- 
rolet began  to  march.  On  October  i,  1922,  it  took  over 
from  General  Motors  the  Central  Products  group  in  De- 
troit, comprising  the  present  gear,  axle  and  forge  plants; 
also  the  Janesville,  Wisconsin,  plant  of  the  former  Samson 
Tractor  Company  which  was  converted  into  an  assembly 
plant.  New  assembly  plants  were  built  at  Buffalo,  New 
York,  and  Norwood,  Ohio.  Body-building  activities  of  the 
St.  Louis  Manufacturing  Company  were  transferred  to  the 
Fisher  Body  Corporation  in  1923.  A  pressed  metal  plant 
was  placed  in  production  in  Flint  in  June. 

When  Mr.  Knudsen  became  president  of  Chevrolet  on 
January  24,  1924,  this  great  subsidiary  of  General  Motors 
had  manufacturing  plants  in  four  cities — Detroit,  Flint,  Bay 
City,  Michigan;  and  Toledo,  Ohio — six  assembly  plants 
and  sixteen  regional  sales  organizations  blanketing  the 
entire  country. 

The  onward  march  continuing,  new  sales  zones  were 
opened  in  many  of  the  leading  cities  of  the  country.  These 
additions  raised  the  total  of  zone  offices  to  fifty-two,  where 
it  remained  until  reduced  to  thirty-six  in  1932. 

Manufacturing  facilities  of  the  company  were  also  in- 
creased by  these  additions: 

1925 — Acquisition  of  the  Bloomfield,  New  Jersey,  plant 
for  export  boxing  operations. 

1926 — Acquisition  of  General  Motors  Truck  Company 
plant,  No.  7,  as  of  March  31,  1926,  to  increase  the 
production  of  front  and  rear  axles.  This  plant  had  been 
originally  the  home  of  Northway  Motor  &  Manu- 
facturing Company,  one  of  the  early  purchases  of 
General  Motors  Company  of  New  Jersey. 

A  new  building  was  erected  in  Hamtramck,  Michi- 
gan, a  suburb  of  Detroit,  for  the  experimental  depart- 
ment of  Chevrolet. 

230  The  Turning  Wheel 

1927 — Large  expansion  program  completed.  On  Sep- 
tember i,  Chevrolet  took  over  the  Grey  iron  foundry 
at  Saginaw. 

1928 — Production  began  in  the  new  assembly  plant  at 
Atlanta,  and  construction  started  on  the  Kansas  City 
assembly  plant  which  entered  production  early  in  1929. 

Including  Canada  and  export,  Chevrolet  built  1,188,053 
cars  and  trucks  in  1928,  becoming  the  world  leader  in  pro- 
duction for  the  second  consecutive  year.  Production  on  the 
four-cylinder  National  model  was  discontinued  in  Decem- 
ber, and  the  six-cylinder  International  model  introduced  on 
January  i,  1929.  This  change  set  a  new  price  level  for 
six-cylinder  cars,  and  in  view  of  its  novelty  the  public  reac- 
tion was  eagerly  awaited.  The  "six"  was  favorably  received 
from  the  start  and  in  1929  Chevrolet  recorded  its  highest 
output — 1,333,150  cars  and  trucks,  a  quantity  more  than 
400  times  as  large  as  those  produced  in  its  first  year,  1912, 
when  the  total  fell  just  short  of  3,000.  The  six  millionth 
Chevrolet  left  the  factory  on  July  i,  1929 ;  by  the  end  of  the 
year  6,504,583  Chevrolets  had  been  produced  in  the  seven- 
teen years  of  the  company's  life. 

Only  one  considerable  property  has  been  added  to  Chev- 
rolet since  1930,  when  the  Martin-Parry  Commercial  Body 
Company  was  purchased,  for  the  purpose  of  building  truck 
bodies  of  types  in  general  demand  to  be  distributed  through 
Chevrolet  zone  offices.  Reference  is  made  to  Chevrolet 
truck  sales  in  Chapter  xxn :  "Commercial  Vehicles." 

While  total  automobile  sales  for  1931  were  off  29  per- 
cent, Chevrolet's  decline  was  only  9  per  cent.  All  through 
the  depression  Chevrolet's  proportion  of  total  automobile 
sales  has  been  rising. 

For  its  second  year  as  a  "six,"  Chevrolet  took  rank  as 
the  world's  greatest  producer  of  motor  cars.  For  four  of 
the  last  six  years — 1927,'  1928,  1931  and  1932 — it  has  led 
the  entire  American  automobile  industry  in  number  of  units 
sold  in  this  country. 

On  April  i,  1932,  an  important  realignment  of  func- 
tions between  and  among  four  of  General  Motors  great 

Passenger  Car  Divisions  231 

producers  brought  to  the  Chevrolet  organization  increased 
responsibilities,  Pontiac  manufacturing,  service  and  account- 
ing being  put  in  charge  of  Mr.  Knudsen  in  addition  to  his 
former  duties,  while  Mr.  Reuter  was  placed  at  the  head 
of  Buick  and  Oldsmobile. 

On  October  16,  1933,  Mr.  Knudsen  became  executive 
vice-president  of  General  Motors  Corporation  at  Detroit 
and  chief  executive  officer  there,  with  general  supervision 
over  all  car  and  body  manufacturing  operations  in  the 
United  States  and  Canada.  M.  E.  Coyle,  formerly  vice- 
president,  succeeded  to  the  presidency  of  Chevrolet. 

With  its  vast  production  plants  and  its  strategically 
located  assembly  plants,  with  its  own  highly  developed 
engineering  staff  and  the  resources  of  General  Motors  be- 
hind it,  Chevrolet  has  made  its  way  to  sales  leadership,  and 
in  this  Anniversary  year  of  General  Motors,  is  the  best  sell- 
ing motor  car  in  the  world. 


As  the  oldest  of  the  General  Motors  car  divisions,  Olds 
Motor  Works  takes  a  just  pride  in  its  history.  In  1931  it 
prepared  a  history  of  the  company  which  contains  this  sum- 
mary of  its  long  career: 

Olds  Motor  Works  was  not  only  the  first  organization  to  produce 
passenger  cars  commercially,  but  it  also  pioneered  many  of  the 
important  advancements  made  in  the  industry.  The  introduction 
of  the  assembly  line  and  of  quantity  production — steps  which  revo- 
lutionized all  existing  automobile  manufacturing  methods  and 
which  established  a  system  that  the  majority  of  manufacturers 
today  are  following — were  instituted  by  Olds  Motor  Works  in 
the  very  early  days  of  its  career.  Olds  Motor  Works  produced  the 
first  two-cylinder  and  four-cylinder  cars — revolutionary  designs 
for  that  time.  The  early  achievements  of  Oldsmobile  established 
public  confidence  in  the  automobile  and  made  possible  its  further 
development.  Olds  Motor  Works  has  continued  its  pioneering 
activities  without  cessation  during  the  thirty-four  years  of  its 
existence,  nearly  every  year  bringing  forth  some  new  and  valuable 
development.  The  story  of  the  Olds  Motor  Works  is,  in  reality,  a 
cross-section  of  the  history  and  progress  of  the  automotive  industry. 

232  The  Turning  Wheel 

General  Motors  bought  Olds  Motor  Works  in  1908, 
three  years  after  the  latter's  removal  from  Detroit  to  Lan- 
sing, and  immediately  reorganized  it.  Production  ran  up  to 
1,690  cars  in  1909,  150  of  them  being  "sixes"  of  a  model 
developed  in  1907  and  first  sold  in  1908.  Thus,  within  a 
year  after  General  Motors  acquired  a  property  which  at 
the  moment  seemed  to  many  without  a  bright  future,  Olds- 
mobile  regained  a  good  market  position,  standing  as  a 
leader  in  the  four-cylinder  field  and  being  a  pioneer  in  the 
six-cylinder  field. 

The  celebrated  Oldsmobile  Limiteds,  with  their  5-inch  by 
6-inch  motors  and  42-inch  wheels,  appeared  in  1910,  when 
310  were  sold.  This  most  distinctive  automobile  of  the  day 
gave  Oldsmobile  the  prestige  of  extreme  luxuriousness.  In 
all,  825  of  these  huge  six-cylinder  cars  were  built  in  the 
space  of  three  years.  Although  highly  successful  from  an 
engineering  standpoint,  the  market  for  them  was  neces- 
sarily restricted,  and  the  company's  market  reliance  was  the 
special  "four."  Sales  of  the  latter  model  dropped  to  1525 
in  1910,  reflecting  the  difficulties  into  which  General 
Motors  fell.  The  next  four  years  were  years  of  reorganiza- 
tion and  readjustment  to  market  needs.  Not  until  1915  was 
Oldsmobile  again  a  market  leader  from  the  standpoint  of 
quantity  production. 

During  this  interval  Oldsmobile  began  its  course,  still 
continuing,  as  a  manufacturer  of  cars  light  in  weight  but 
high  in  quality.  As  compared  with  its  larger  predecessors, 
the  new  Oldsmobile  was  planned  to  have  equal  finish  and 
material,  size  only  being  sacrificed.  Consumers  have  since 
become  accustomed  to  high  quality  in  small  cars;  but  the 
program  was  then  novel  and  received  such  firm  support 
that  Oldsmobile  production  leaped  ahead,  rising  from 
nearly  8,000  in  1915  to  more  than  22,000  in  1917.  After 
the  lag  of  a  war  year  in  which  supplies  could  not  be  obtained 
for  a  large  passenger  car  schedule,  Oldsmobile  scored  an- 
other marked  advance  in  1919  with  39,000  units.  Of  this 
total  more  than  11,000  units  were  "eights."  The  first  Olds- 
mobile  "eight,"  and  the  first  offered  to  the  American  pub- 
lic in  its  price  class,  appeared  in  1915. 

Passenger  Car  Divisions  233 

When  the  United  States  entered  the  World  War,  Olds 
Motor  Works  was  one  of  the  first  automobile  plants  to  get 
into  production  on  government  work.  During  1917-1918, 
2,000  kitchen  trailers  were  produced.  A  new  motor  plant 
was  built  for  the  manufacture  of  Liberty  Motors,  although 
never  used  for  that  purpose.  This  plant  was  completed  and 
considerable  machinery  installed  by  the  time  the  Armistice 
was  signed  in  1918.  A  swift  change  in  plans  was  necessary. 
By  January  i,  1919,  machinery  and  tools  had  been  moved 
into  the  new  plant  from  the  Northway  Motor  Company  at 
Detroit,  and  production  started  on  the  eight-cylinder  engine 
which  up  to  that  time  had  been  made  at  the  Northway  plant 
under  the  supervision  of  the  Oldsmobile  engineering  de- 

On  May  18,  1921,  A.  B.  C.  Hardy  became  president 
and  general  manager.  In  years  of  service  he  was  the  eldest 
of  the  General  Motors  executives.  From  1892,  when  he 
was  made  superintendent  and  secretary  of  the  Wolverine 
Carriage  Company,  to  May,  1921,  when  he  came  to  the 
Olds  Motor  Works,  he  held  practically  every  office  of 
responsibility  in  the  carriage  and  automobile  industry  of 
Michigan.  In  1898  he  was  elected  president  of  the  Durant- 
Dort  Carriage  Company,  and  in  1902  he  organized  Flint's 
first  automobile  concern,  the  Flint  Automobile  Company. 

Another  round  with  carriage  manufacturing,  this  time 
in  Iowa,  and  Mr.  Hardy  was  ready  to  concede  that  the  day 
of  the  horse-drawn  vehicle  was  nearly  over.  In  1914  he 
became  vice-president  and  general  manager  of  the  Little 
Motor  Car  Company  of  Flint,  and  then  of  the  Chevrolet 
Motor  Company,  later  going  to  New  York  as  assistant  to 
Mr.  Durant.  In  1918  he  was  made  assistant  to  the  presi- 
dent of  the  General  Motors  Corporation. 

While  at  Chevrolet  he  had  shown  ability  in  plant  reor- 
ganization, now  needed  at  Oldsmobile  after  the  weaknesses 
caused  by  the  interruptions  and  turmoil  of  the  war  period 
had  been  revealed  by  the  post-war  slump.  After  the  black 
year  of  1921,  which  registered  a  40  percent  drop  in  out- 
put for  Oldsmobile,  the  company  resumed  its  upward  march 
with  a  21,216  production  in  1922.  In  the  first  twenty-two 

234  The  Turning  Wheel 

years  of  the  century  Oldsmobile  had  produced  upward  of 
200,000  cars. 

Following  the  post-war  period  there  was  a  noticeable 
trend  toward  the  "sixes."  Oldsmobile  had  been  building  six- 
cylinder  cars  since  1908,  but  this  type  of  automobile  was 
relatively  high-priced,  enough  so  to  be  out  of  reach  of  the 
majority  of  automobile  buyers,  and  "fours"  had  been  Olds- 
mobile's  dependence  in  reaching  the  masses.  Work  was  now 
begun  on  a  six-cylinder  car  to  sell  below  $1,000.  The  first 
model  of  this  light  Oldsmobile  usix"  was  introduced  in 
September,  1923,  and  Oldsmobile  left  the  four-cylinder  field. 

In  1926  Oldsmobile  engineers  designed  another  six- 
cylinder  car,  which  brought  a  new  high  production  record. 
In  1928  Oldsmobile  sold  more  than  86,000  cars  and  in 
1929  more  than  100,000,  which  included  the  Viking  model. 
From  1927  to  1929  twelve  large  buildings  were  erected  and 
several  additions  were  made  to  the  Lansing  factories.  Olds- 
mobile  brought  out  its  first  "straight  eight"  in  1932. 

Olds  Motor  Works  has  been  one  of  the  chief  factors  in 
the  growth  of  Lansing  from  2,000  in  1890  to  79,000 
in  1930.  Employment  rose  from  3,700  in  1920  to  7,500  in 
1930,  the  latter  number  including  employees  of  the  Fisher 
Body  plant,  located  at  the  Oldsmobile  factory,  and  devoted 
wholly  to  the  construction  of  Oldsmobile  "six"  bodies. 

Mr.  I.  J.  Reuter  succeeded  Mr.  Hardy  as  president  and 
general  manager.  Mr.  Reuter  went  to  Opel  in  Germany  in 
October,  1929,  returning  to  Olds  in  1932.  In  October,  1933, 
Mr.  C.  L.  McCuen  became  general  manager  of  Olds  Motor 
Works  with  which  he  had  been  associated  in  an  engineering 
capacity  since  1926. 

Chapter   XVII 



IENERAL  MOTORS  OF  CANADA,  LTD.,  like  many  other 
organizations  in  the  automobile  field,  had  its  beginnings  in 
the  carriage  industry.  The  founder  of  the  business  was 
Robert  McLaughlin,  whose  father  came  to  Canada  from 
the  British  Isles  in  1835,  and  in  1867,  tne  Year  °f  Con- 
federation of  the  scattered  Canadian  provinces,  produced 
the  first  McLaughlin  carriage  at  his  primitive  forge  in  the 
cross-roads  village  of  Enniskillen,  Ontario.  Transportation 
was  rudimentary — it  was  eighteen  years  before  Canada  had 
a  transcontinental  railroad.  The  McLaughlin  vehicles  there- 
fore found  a  ready  market,  particularly  since  they  were 
built  with  thoroughness  and  craftsmanship. 

His  reputation  established,  Robert  McLaughlin  moved 
in  1878  to  Oshawa,  and  began  making  carriages  for  the 
wholesale  trade.  A  destructive  fire  late  in  1899  caused 
temporary  removal  to  Gananoque.  The  next  year,  the  com- 
pany reoccupied  new  and  larger  premises  at  Oshawa,  which 
became  the  nucleus  of  the  present  large  and  modern  plant 
in  that  city. 

In  the  meantime,  his  two  sons — George  W.,  and  R.  S. 
McLaughlin — became  associated  with  their  father  in  the 
carriage  business  which,  before  it  entered  the  motorized 
field,  produced  over  270,000  horse-drawn  vehicles — car- 
riages, buggies,  and  sleighs. 

The  trend  in  transportation  led  to  the  formation  of  the 
McLaughlin  Motor  Car  Company,  Ltd.,  in  1907,  with 


236  The  Turning  Wheel 

R.  S.  McLaughlin  as  president,  Oliver  Hezzlewood,  vice- 
president,  G.  W.  McLaughlin,  treasurer,  and  Robert 
McLaughlin,  the  elder,  in  an  advisory  capacity.  A  survey  of 
the  entire  automotive  industry  convinced  the  new  organiza- 
tion that  Buick  was  the  ideal  car  to  meet  Canadian  con- 
ditions. Thereupon  the  company  made  a  fifteen-year 
contract  with  Buick  Motor  Company  for  sole  manufacturing 
rights  of  Buick  in  Canada.  The  McLaughlin-Buick  before 
long  became  Canada's  standard  car.  At  the  close  of  1914, 


General  Motors  Corporation  owned  $500,000  of  the  cap- 
ital stock  of  the  McLaughlin  Motor  Car  Company,  Ltd., 
and  McLaughlin  Carriage  Company,  Ltd.,  had  $503,000. 

The  McLaughlins  gave  up  the  carriage  business  in  1915 
to  make  way  for  Chevrolet  Motor  Company  of  Canada, 
Ltd.  Under  them  Chevrolet  met  with  instant  success  in 
the  Dominion. 

On  November  8,  1918,  the  McLaughlin  and  Canadian 
Chevrolet  companies  were  merged  into  General  Motors  of 
Canada,  Ltd.,  of  which  R.  S.  McLaughlin  became  president 
and  G.  W.  McLaughlin,  vice-president.  The  father  was  no 
longer  active,  but  took  a  keen  interest  in  the  new  organ- 
ization until  his  death  in  1921. 

On  December  19,  1918,  General  Motors  Corporation 
bought  the  remaining  interest  in  McLaughlin  Carriage, 
Chevrolet  of  Canada,  and  McLaughlin  Motor  Car  com- 
panies for  49,000  shares  of  Common  and  $550,000  cash. 
Capitalization  of  General  Motors  of  Canada,  Ltd.,  was  in- 
creased to  $10,000,000  soon  afterward. 

General  Motors  of  Canada,  Limited    237 

General  Motors  of  Canada,  Ltd.,  is  a  manufacturing 
company,  with  authorized  capital  stock  of  $10,000,000,  par 
$100,  of  which  $6,940,000  has  been  issued.  Its  sales  and 
service  subsidiaries  are : 

Cadillac  Motor  Car  Company  of  Canada,  Ltd. 
Chevrolet  Motor  Company  of  Canada,  Ltd. 
McLaughlin  Motor  Car  Company,  Ltd. 
Pontiac  Motor  Company  of  Canada,  Ltd. 
Olds  Motor  Works  of  Canada,  Ltd. 
General  Motors  Products  of  Canada,  Ltd. 

Mr.  R.  S.  McLaughlin,  now  one  of  the  older  General 
Motors  directors  in  point  of  service,  heads  the  various  sub- 
sidiaries of  the  Canadian  company.  Mr.  McLaughlin  was 
first  elected  to  the  board  in  1910,  and  again  in  1918,  since 
which  time  he  has  served  continuously. 

General  Motors  Products  of  Canada,  Ltd.,  is  a  selling 
organization  with  eight  zone  offices  in  the  cities  of  Van- 
couver, Calgary,  Winnipeg,  Regina,  Toronto,  London, 
Montreal,  and  Moncton.  Parts  depots  are  also  maintained 
in  the  principal  cities,  and  there  are  1,000  strong  individual 
dealerships  in  Canada. 

General  Motors  products  are  financed  in  the  Canadian 
market  by  General  Motors  Acceptance  Corporation,  with 
headquarters  in  Toronto,  and  branch  offices  in  the  eight 
zone  cities  mentioned.  Insurance  service  is  furnished  by 
General  Exchange  Insurance  Corporation,  also  at  Toronto. 
Manufacturing  operations  are  centered  in  four  cities. 

The  works  at  Oshawa  are  the  largest ;  having  a  floor  space 
of  2,200,000  square  feet  and  a  production  capacity  of  750 
cars  a  day.  Employees,  at  the  peak  period,  numbered  7,000. 

The  works  at  Regina,  Saskatchewan,  were  opened  in  1928 
for  assembly  of  Chevrolet  and  later,  Pontiac.  They  have  a 
floor  space  of  370,000  square  feet  and  a  capacity  of  30,000 
cars  a  year. 

At  Walkerville,  engines  are  produced  for  Buick,  Chev- 
rolet, Oldsmobile,  and  Pontiac  automobiles  and  front  axles 
for  Chevrolet,  providing  employment  for  as  many  as  2,000 

238  The  Turning  Wheel 

An  associated  factory,  though  independently  operated,  is 
that  of  the  McKinnon  Industries  unit  of  General  Motors 
at  St.  Catharines,  Ontario,  where  generators,  starters,  dif- 
ferentials, spark  plugs  and  other  parts  are  made. 

Domestic  shipments  of  cars  from  the  Oshawa  plant 
amounted  to  9,915  in  1916,  and  had  grown  to  22,408  in 
1920.  The  high  point  for  domestic  shipments  was  reached 
in  1928  with  75,000  cars.  In  the  seventeen  years  of  pro- 
duction from  1916  to  1932,  more  than  725,000  Canadian- 
made  General  Motors  cars  were  manufactured.  During 


1932,  sales  of  General  Motors  of  Canada  passenger  car 
lines  were  39.3  percent  of  all  the  sales  in  Canada,  and  com- 
mercial cars  accounted  for  41  percent  of  all  commercial 
car  sales. 

Export  shipments  from  Oshawa  have  been  made  to  as 
many  as  sixty-five  overseas  countries  in  a  single  year.  In 
1932  and  1933,  Buicks  for  the  British  Isles  were  all  shipped 
by  General  Motors  of  Canada,  Ltd.  (McLaughlin-Buicks). 

Cars  are  manufactured,  not  merely  assembled,  in  the 
plants  of  General  Motors  of  Canada,  Ltd.,  even  bodies  for 
most  of  the  lines  being  made  at  Oshawa.  It  has  been  the 
policy  of  General  Motors  Corporation  to  provide  as  much 
employment  as  possible  in  the  countries  where  sales  oppor- 
tunities are  enjoyed.  Canada  is  in  a  remarkable  position  in 

General  Motors  of  Canada,  Limited    239 

this  respect,  inasmuch  as  General  Motors  cars  are  built 
there  almost  completely  "from  the  ground  up,"  not  simply 
put  together  with  parts  imported  from  the  United  States.  In 
the  early  days,  strictly  speaking,  there  was  very  little  auto- 
mobile manufacturing  in  Canada,  but  in  recent  years  there 
has  been  a  steady  development  until  today  the  Canadian 
automobile  industry  may  be  regarded  as  a  manufacturing 
industry  in  the  true  sense,  with  General  Motors  of  Canada, 
Ltd.,  playing  an  important  role.  General  Motors  cars 
made  in  Canada  have  a  high  percentage  of  Canadian  con- 
tent, to  which  the  Canadian  motor-car  user  reacts  very  fa- 
vorably. Naturally,  too,  General  Motors  cars  exported  from 
Canada  to  other  parts  of  the  British  Empire  in  a  finished 
state  are  highly  British  in  content,  and  this  also  is  helpful 
in  view  of  the  recent  emphasis  on  the  Empire  slogan  "Buy 

The  evolution  from  assembling  to  manufacturing  in  the 
case  of  General  Motors  cars  in  Canada  has  been  accom- 
panied by  frequent  alterations  in  the  tariff  as  it  affects  the 
Canadian  industry.  These  alterations  group  themselves  into 
two  or  three  periods  of  varying  duration. 

From  1907  to  1926  the  Canadian  customs  tariff  on  all 
imported  automobiles  was  35  percent.  The  degree  of  pro- 
tection offered  by  this  impost  was  sufficient  to  give  the 
Canadian  industry  a  good  start.  Leading  companies  in  the 
United  States,  including  General  Motors,  established  large 
plants  there  for  assembling  and  for  such  manufacturing  as 
could  then  be  carried  on,  in  view  of  the  limited  supply  of 
Canadian  parts  and  material.  It  was  during  this  period  that 
General  Motors  built  the  large  Walkerville  plant,  which  is 
now  a  part  of  General  Motors  of  Canada,  Ltd.  At  first, 
this  plant  supplied  some  engines  and  parts  of  axles.  At 
present,  its  contribution  to  finished  Canadian  cars  is  much 
larger  and  the  plant  has  sufficient  capacity  to  supply  engines 
for  Chevrolet,  Pontiac,  McLaughlin-Buick,  and  Oldsmobile 
in  whatever  quantities  required. 

The  next  alteration  in  Canadian  tariff  structure  was 
downward.  In  1926,  the  customs  duty  on  small  cars  was 
reduced  to  20  percent  and  that  on  large  cars  to  27.5  per- 
cent. At  the  same  time  a  "drawback"  of  25  percent  was 

240  The  Turning  Wheel 

allowed  on  material  to  be  used  for  cars  of  40  percent  Can- 
adian manufacture,  and  in  the  following  year  this  "draw- 
back" was  only  to  apply  on  cars  of  50  percent  Canadian 
manufacture.  The  reduction  from  35  percent  to  20  percent 
duty  was  made  effective  in  the  face  of  general  protests  from 
almost  the  whole  Canadian  automotive  industry,  and  the 
figures  showing  imports  of  small  cars  for  the  next  three 
years  were  striking  enough  to  justify  those  objections.  Im- 
ports in  1926  were  28,000  cars;  in  1927  they  reached 
36,000;  the  following  year  they  totalled  47,000;  and  in 
1929,  44,000. 

The  ultimate  effect  on  manufacturing  process  of  this  par- 
ticular tariff  period  was  to  increase  the  number  of  Canadian 
parts  and  the  Canadian  content  of  finished  cars.  At  first  it 
was  difficult  with  the  complete  factory  output  to  qualify  for 
the  customs  "drawback"  on  cars  of  50  percent  Canadian 
content,  but  before  many  years  had  passed  this  was  easily 
accomplished.  With  the  idea  of  providing  the  entire  motor 
trade  of  Canada,  including  General  Motors,  with  necessary 
parts,  General  Motors  Corporation  in  1929  purchased 
McKinnon  Industries  at  St.  Catharines,  Ontario,  which,  in- 
terestingly enough,  was  a  survival  of  the  old-time  carriage 
trade,  as  was  the  case  with  so  many  existing  motor-car 
industries.  At  that  time,  McKinnon  Industries  was  con- 
verted to  the  manufacture  of  differentials  and  rear  axles. 
Development  was  very  rapid,  and  many  other  parts  have 
since  been  added,  including  steering  gears,  shock  absorbers, 
and  ignition  parts.  Recently,  also,  the  making  of  spark 
plugs  for  the  trade  and  for  General  Motors  cars  was  com- 
menced under  the  direction  of  the  AC  Spark  Plug  Company. 
In  addition  to  supplying  the  whole  Canadian  trade  with 
many  motor  parts,  this  plant  also  produces  the  unit  for  the 
Canadian-built  Frigidaire  refrigerator. 

Entering  a  more  recent  period  of  tariff  history,  it  is 
noticed  that  the  motor-car  schedule  was  completely  rewrit- 
ten in  1930.  In  the  case  of  small  cars,  the  customs  duty  was 
set  at  20  percent  (up  to  $1,200 — trucks  included) ;  on  cars 
from  $1,200  to  $2,100  duty  was  30  percent;  and  on  cars 
from  $2,100  up,  the  duty  was  40  percent.  Moreover,  the 

General  Motors  of  Canada,  Limited   241 

"drawback"  was  eliminated  on  a  specified  list  of  parts,  and 
was  made  25  percent  for  most  of  the  remaining  parts  and 
60  percent  on  a  very  restricted  list  in  the  case  of  cars  of  50 
percent  Canadian  content.  A  noticeable  effect  of  this  change 
was  a  reduction  in  the  number  of  car  imports.  While  the 
change  came  at  a  time  when  sales  generally  were  decreasing 
heavily,  yet  the  reduction  in  the  number  of  imports  was 
more  than  proportionate. 

Imports  between  1930  and  1931  declined  much  more 
heavily  than  did  Canadian  production.  In  1931,  another  cus- 
toms duty  alteration  took  place.  On  imported  cars  the  valu- 
ation for  duty  was  fixed  at  a  flat  20  percent  discount  from 
the  list  price.  Inasmuch  as  discounts  on  many  cars  had  been 
claimed  at  a  much  higher  figure,  the  effect  of  the  change 
was  to  increase  the  amount  of  duty  paid  on  most  cars.  At 
this  same  time  the  importation  of  used  cars  was  prohibited, 
except  in  a  few  cases,  such  as  settlers  bringing  in  effects. 

The  immediate  result  was  a  further  decline  in  all  car  im- 
ports. The  year  1932  saw  a  reduction  of  more  than  80 
percent  in  units  imported,  while  Canadian  production  at  the 
same  time  declined  only  26  percent. 

In  addition  to  customs  duties,  there  has  been,  since  the 
war  years,  an  excise  tax  of  varying  rates  on  cars  either 
imported  or  made  in  Canada.  The  excise  tax  until  1926  was 
5  percent  on  cars  not  more  than  $1,200,  and  10  percent  on 
cars  valued  in  excess  of  $1,200.  In  1926  this  was  changed, 
to  allow  complete  exemption  from  the  excise  tax  in  the  case 
of  cars  valued  at  not  more  than  $1,200,  if  they  were  40 
percent  Canadian  content  (50  percent  Canadian  content  in 
1927  and  thereafter).  The  excise  tax  was  also  eliminated  in 
the  case  of  cars  imported  from  Great  Britain  if  they  were 
of  similar  British  content.  The  same  rates  of  excise  tax 
apply  at  the  present  time. 

The  final  outcome  of  this  evolution  in  tariffs  and  manu- 
facturing is  that  General  Motors  cars  in  Canada  are  very 
largely  Canadian-built.  Examining  the  Chevrolet  automo- 
bile, for  example,  it  is  found  that  all  parts  of  the  Dominion 
contribute.  Chassis  springs  are  purchased  from  firms  which 
make  them  at  Gananoque,  Ontario,  and  Oshawa.  Front 
axles  are  manufactured  by  the  General  Motors  plant  at 

242  The  Turning  Wheel 

Walkerville,  forgings  being  supplied  by  a  Canadian  com- 
pany in  the  same  city.  Third  member  assemblies,  including 
differential,  are  made  by  McKinnon  Industries  at  St.  Cath- 
arines. The  body  is  completely  built  at  Oshawa.  Since  the 
Oshawa  factory,  from  its  earliest  days,  had  an  extensive 
woodworking  establishment  for  manufacturing  bodies,  no 
Canadian  division  of  the  Fisher  Body  Corporation  was 
formed.  Instead,  the  operation  was  amalgamated  with  the 
general  manufacturing.  All  General  Motors  of  Canada 
cars,  of  course,  bear  the  Fisher  insignia.  Engines  are  built 
at  Walkerville  and  radiators  at  Oshawa,  material  in  both 
cases  being  supplied  by  Canadian  companies.  Factories  in 
many  cities  supply  castings,  bumpers,  glass,  wiring,  paint, 
trim,  hardware,  and  wheels. 

Evolving  to  its  present  proportions  under  a  Canadian 
management  of  long  standing,  which  has  coped  successfully 
with  manufacturing  and  sales  problems  rendered  more 
intricate  by  tariff  changes,  General  Motors  of  Canada 
stands  today  as  one  of  the  leading  industries  of  the  great 

Chapter   XVIII 


N  THE  early  'nineties  R.  E.  Olds,  as  previously  related, 
made  the  first  sale  of  an  American  automobile  for  export,  a 
chance  sale  resulting  from  a  description  of  the  Olds  steamer 
published  in  the  Scientific  American  of  May  21,  1892.  Since 
then  the  overseas  trade  in  motor  cars  has  become  a  leading 
factor  in  America's  foreign  commerce. 

World  trade  in  General  Motors  products  is  a  business  of 
great  complexity  and  extent.  The  Overseas  Operations  are 
divided  into  three  major  divisions,  Vauxhall  Motors,  Ltd., 
which  manufactures  and  sells  its  products  in  the  British 
Isles;  Adam  Opel,  A.  G.,  which  manufactures  and  sells  its 
products  in  Germany;  and  the  General  Motors  Export  di- 
vision, which  is  the  assembling  and  merchandising  organiza- 
tion responsible  for  the  distribution  of  all  products  from 
whatever  source  in  the  world  markets  outside  of  the  United 
States,  Canada,  Germany,  and  the  British  Isles. 

The  Export  division  consists  of  four  great  territorial 
regions,  each  under  the  charge  of  a  regional  director,  who  is 
responsible  to  the  general  manager  in  New  York.  These 
major  territories  under  the  control  of  the  regional  directors 

Europe,   with   six   plants    located   in    France,    Belgium, 

Sweden,  Denmark,  Spain,  and  Egypt. 
South  America  and  South  Africa,  with  three  plants,  in 

Brazil,  Argentina,  and  Cape  Colony,  South  Africa. 


244  The  Turning  Wheel 

Australasia,  with  assembly  plants  and  a  complete  body 
manufacturing  plant  in  Australia  and  an  assembly 
plant  in  New  Zealand. 

Far  East,  with  assembly  plants  in  Japan,  India,  and  Java. 

The  regional  directors  of  those  vast  areas  maintain 
headquarters  at  the  home  office  but  spend  most  of  their 
time  traveling  far  and  wide  over  their  territories. 

But  a  goodly  portion  of  the  planet  lies  outside  of  these 
wide  jurisdictions,  and  the  trade  originating  there  is 
handled  by  General  Motors  Export  Company  from  New 
York  City.  This  far-flung  task  embraces  such  distant  and 
diverse  areas  as  China,  Mexico,  all  of  Central  and  South 
America  except  Brazil,  Uruguay,  and  Argentina,  vast 
sections  of  Africa,  and  also  the  Caribbean  and  Pacific 

The  sun  never  sets  on  General  Motors.  Its  Japanese 
workmen  in  Osaka  are  putting  on  their  sandals  to  go  to 
work  while  its  South  African  workmen  are  starting  home- 
ward from  the  factory  at  Port  Elizabeth.  Its  salesmen  know 
what  it  is  to  compete  with  the  indigenous  transport — on 
wheels  and  otherwise — some  of  it  most  unusual,  as  exampled 
by  the  carabao  (water  buffalo)  pulling  a  sled  in  Malaysia; 
horse-drawn  carts  with  seven-foot  wheels  in  Argentina; 
coolie-carried  chairs  in  a  Chinese  bridal  party  procession; 
camel  trains  of  the  Sahara  and  camel-drawn  wagons  loaded 
with  wool  in  Australia.  In  these  globe-spanning  operations 
and  contacts  General  Motors  representatives  have  met  all 
manner  of  men  and  all  varieties  of  problems  in  manage- 
ment, transportation,  and  human  nature. 

This  peaceful  penetration  of  the  near  and  remote  parts 
of  the  wrorld  has  appealed  to  men  willing  to  go  forth,  adapt 
themselves,  and  carry  their  message  with  the  zeal  and  con- 
viction of  the  missionary  of  old.  In  so  doing,  they  have  come 
upon  all  the  colorful  scenes  of  this  earth  from  the  narrow, 
crooked  lanes  of  Java  lined  with  thatched  huts,  to  over- 
crowded tropical  harbors  and  the  long  reaches  of  desert 
and  river,  each  environment  calling  upon  their  ingenuity, 
resources  of  patience,  good-will,  and  perseverance.  Their 
lot  is  one  of  hard  work,  against  a  background  of  novelty, 

General  Motors  Across  the  Seas      245 

with  always  the  duty  of  learning  the  manners  and  customs 
of  each  foreign  field  and  tactfully  seeking  to  understand 
its  people  and  their  needs. 

The  life  appeals  to  adventurous  men  who  are  at  home 
anywhere.  There  are  General  Motors  families  who  answer 
a  call  to  move  with  little  more  concern  than  if  they  were 
moving  to  the  next  block.  One  such  family  contains  four 
children,  each  born  in  a  different  country,  each  speaking  the 
language  of  his  or  her  early  environment  better  than  Eng- 
lish. All  over  the  world  a  mobile  force  continues  an  unre- 
mitting drive  for  sales. 

This  vast  organization  began  humbly  enough  on  June  19, 
1911,  when  the  General  Motors  Export  Company  was 
incorporated  in  Michigan  for  $10,000,  under  the  banker 
management  then  in  control  of  General  Motors.  The  presi- 
dent of  General  Motors  Company,  Mr.  Thomas  Neal,  be- 
came its  president.  Export  started  operations  with  a  staff 
of  only  three  persons,  but,  even  so,  it  was  in  a  sense  the 
most  complete  expression  of  General  Motors  because  it 
was  the  first  selling  organization  in  which  all  the  various 
General  Motors  units  joined  to  carry  a  common  objective. 
Hitherto,  foreign  sales,  chiefly  of  Buicks  and  Cadillacs,  had 
been  made  by  the  divisions'  staffs  acting  independently; 
henceforth  for  many  years  all  foreign  trade  would  pass 
through  the  Export  Company.  During  Mr.  Neal's  presi- 
dency and  up  to  1916,  Mr.  O.  A.  Bennett  was  the  guiding 
spirit  of  Export.  Mr.  Bennett  became  president  in  1915. 

At  first  the  Company  pushed  foreign  sales  along  mail- 
order lines  and  made  no  really  intensive  effort  to  develop 
sustained  activities  in  foreign  selling.  Capital  was  increased 
to  $100,000  in  1912.  Soon  afterward  Export  brought  its 
more  important  activities  to  the  natural  seat  of  foreign 
commerce,  New  York  City,  where  sales  for  the  entire  world 
were  handled  by  a  staff  of  fifteen  or  sixteen  people  working 
in  a  three-room  office  on  Park  Avenue. 

World  War  needs  developed  large  orders,  but  the  entry 
of  America  so  reduced  production  that  the  Export  Com- 
pany found  itself  with  a  limited  allotment  of  cars  at  its  dis- 
posal, which  it  had  to  allocate  as  judiciously  as  possible 
among  its  distributors  throughout  the  world. 

246  The  Turning  Wheel 

When  Mr.  Bennett  resigned  the  presidency  because  of  ill 
health  in  1916  (he  died  in  1917),  he  was  succeeded  by 
R.  H.  "Trainload"  Collins,  the  vigorous  sales  manager  of 
Buick.  Mr.  Collins  held  the  office  until  Mr.  J.  A.  Haskell 
became  president  to  remain  at  the  helm  until  1922.  Head- 
quarters were  moved  to  n  Broadway  in  1917,  and  to  224 
West  57th  Street  in  1918. 

On  June  27,  1918,  General  Motors  Export  was  combined 
with  General  Motors  (Europe),  Ltd.,  with  a  capital  of 
$212,932.75.  General  Motors  (Europe),  Ltd.,  had  begun 
life  in  1909  as  Bedford  Motors,  Ltd.,  of  London,  England, 
making  Bedford  Buicks,  the  chassis  being  Buick.  It  became 
General  Motors  (Europe),  Ltd.,  in  1912,  but  down  to  1914 
handled  only  Buicks.  Reference  will  be  made  later  to  Gen- 
eral Motors,  Ltd.,  London,  which  succeeded  to  the  Eng- 
lish representation,  and  imported  cars  and  trucks  into  Eng- 
land, independent  of  the  Export  Company. 

What  may  be  called  the  modern  development  of  General 
Motors  Export  dates  from  the  end  of  the  World  War, 
when  demand  for  rapid  transport  rose  rapidly.  Export  sales 
advanced  from  6,004  units  in  1918  to  14,665  in  1919.  In 
1919,  Overseas  Motor  Service  Corporation  was  organized 
to  service  and  distribute  motor-car  parts  and  accessories  in 
the  export  market.  These  include  -  not  only  well  known 
General  Motors  products  such  as  AC  spark  plugs,  AC 
speedometers,  Delco  products  (except  in  the  British  Isles; 
Hyatt  also  excepted  from  Continental  Europe),  but  also 
parts  and  accessories  of  other  makers. 

Up  to  1920  the  backbone  of  the  overseas  business  was 
Buick.  Plans  were  made  to  give  it  wider  distribution  and 
push  its  sale.  The  Export  Company,  now  due  for  permanent 
expansion  overseas,  made  studies  of  the  export  organiza- 
tions of  several  other  large  American  concerns  doing  busi- 
ness abroad.  It  also  established  a  training  school  in  the 
Buick  Building,  1737  Broadway,  to  provide  intensive  train- 
ing for  Company  employees  who  were  to  serve  in  the  over- 
seas field,  and  to  aid  those  in  the  home  office  to  improve 
themselves  in  their  knowledge  of  the  conduct  of  the  Com- 
pany's business.  In  1920  unit  sales  reached  a  volume  of 

General  Motors  Across  the  Seas      247 

29,772  (Export  1927  annual  report).  Need  for  more  room 
led  the  Company  to  move  its  offices  from  224  West  57th 
Street  to  the  Wurlitzer  Building  at  120  West  42nd  Street. 

In  1921  Mr.  J.  D.  Mooney  became  a  vice-president  of 
the  Export  Company.  The  next  year  he  succeeded 
Mr.  Haskell  as  president.  The  new  president  had  been 
general  manager  of  the  Remy  Electric  Company,  another 
General  Motors  division.  The  management  outlined  an  in- 
tensive sales  campaign,  the  fruits  of  which  appeared  in  the 
years  of  the  "Golden  'Twenties."  For  this  campaign  six 
sales  divisions  were  set  up:  Caribbean,  South  American, 
Australian,  African,  European,  and  Far  Eastern. 

While  the  United  States  and  Canada  absorbed  cars  at  a 
rate  which  demanded  constant  expansion  at  home,  other 
fields  could  have  only  the  attention  they  insisted  on  having; 
the  real  effort  toward  intensive  cultivation  of  these  fields 
followed  shortly  after  the  post-war  slump  of  1920-21 
when  the  domestic  market  failed  to  absorb  its  customary 
volume  of  cars. 

By  1922  the  Company  employed  300  persons,  including 
field  men,  but  still  the  Export  division  had  not  taken  on 
definite  shape.  In  that  year  the  Export  Company  returned 
to  the  General  Motors  Building  at  224  West  57th  Street. 

In  1923  the  Corporation  began  to  advertise  in  overseas 
motor  and  other  publications,  reaching  the  public  in  as 
many  as  fifty-five  publications  in  sixteen  different  countries. 
The  senior  field  personnel  was  increased  by  one  third  in  the 
same  year,  and  new  zone  offices  continued  to  be  added, 
situated  in  strategic  positions  to  take  immediate  advantage 
of  any  improvement  in  political  and  economic  conditions. 

Outside  of  the  United  Kingdom  and  Ireland,  which  was 
controlled  directly  by  General  Motors,  Ltd.,  with  head- 
quarters in  London,  General  Motors  overseas  offices  were 
located  in  Paris,  Soerabaia,  Calcutta,  Manila,  Melbourne, 
Sydney,  Johannesburg,  Sao  Paulo,  Copenhagen,  Bombay, 
Shanghai,  Honolulu,  Wellington,  Madrid,  Mexico  City, 
and  Buenos  Aires.  General  Motors  cars  were  being  sold  in 
125  countries,  giving  coverage  almost  world-wide.  General 
Motors  World,  organ  of  the  Overseas  Group,  reports  that 

248  The  Turning  Wheel 

leading  markets  in  1923,  the  first  of  a  series  of  record- 
breaking  years,  were  Australia,  United  Kingdom,  Mexico, 
Sweden,  Argentina,  Spain,  Cuba,  Belgium,  and  Japan. 

Chevrolet,  steadily  making  a  better  reputation  for  itself, 
was  now  a  factor  in  the  low-priced  field,  and  it  seemed 
advantageous  to  assemble  Chevrolets  abroad.  Accordingly, 
in  1924,  plants  were  established  in  London  and  Copen- 
hagen. The  London  venture  soon  came  under  the  handicap 
of  a  horsepower  tax.  However,  as  there  seemed  to  be  a 
place  for  a  satisfactory  truck  of  the  Chevrolet  model,  com- 
mercial body-building  was  started  at  General  Motors,  Ltd. 
The  trend  in  the  British  Isles  was  toward  a  smaller,  lower- 
powered  and  lower-priced  product.  The  search  for  a  satis- 
factory passenger  car  to  supplement  the  truck  led  to  the 
Vauxhall  purchase,  completed  November,  1925. 

Copenhagen,  on  the  other  hand,  operated  successfully 
from  the  start  and  furnished  inspiration  for  assembly  activi- 
ties elsewhere.  The  original  Company  of  1911,  primarily 
a  sales  company,  and  known  by  its  old  name  of  General 
Motors  Export  Company,  still  functions  as  such,  finding  its 
territory  in  those  fields  not  covered  by  the  self-contained, 
locally-operated  organizations.  As  an  operating  concern,  the 
Export  Company  has  a  managing  director  and  a  sales  or- 
ganization and  a  place  in  line  with  other  operating  compan- 
ies of  the  overseas  group.  But  in  general,  reference  to  the 
Export  Company  herein  means  the  corporate  organization 
rather  than  the  operating  one.  More  will  be  told  about  the 
plan  of  organization. 

The  focal  points  of  General  Motors  assembly,  manu- 
facturing, warehousing,  and  distribution  overseas  are: 

New  York  City,  New  York;  Luton,  London,  and  Birming- 
ham, England;  Copenhagen,  Denmark;  Stockholm,  Sweden; 
Antwerp,  Belgium;  Riisselsheim  and  Berlin,  Germany; 
Puteaux,  France;  Barcelona,  Spain;  Alexandria,  Egypt; 
Buenos  Aires,  Argentina;  Sao  Paulo,  Brazil;  Montevideo, 
Uruguay;  Port  Elizabeth,  South  Africa;  Woodville,  Aus- 
tralia; Wellington,  New  Zealand;  Osaka,  Japan;  Batavia, 
Java,  D.  E.  I.;  Bombay,  India. 

The  assembly  plants  at  Buenos  Aires  and  Sao  Paulo  date 
from  1925,  also  that  at  Antwerp,  Belgium,  the  seat  of 

General  Motors  Across  the  Seas      249 

General  Motors  Continental.  General  Motors  assembly 
operations  in  Spain  began  in  1925  with  a  plant  at  Malaga, 
operations  being  later  transferred  to  Madrid  and  recently 
to  Barcelona. 

Outside  of  the  Export  division  staff,  but  part  of  the 
General  Motors  Overseas  Operations  group  under  Mr. 
Mooney's  jurisdiction,  appeared  at  this  time  General 
Motors,  Ltd.,  London,  England,  whose  beginnings  have 
been  previously  noted.  The  plant  at  Hendon,  eight  miles 
from  London,  was  expanded  in  1925.  A  conveyor  system 
took  the  crates  arriving  from  the  Oshawa,  Canada,  plant 
and  turned  out  the  car  ready  for  road  tests  and  distribu- 
tion in  the  United  Kingdom.  The  commercial  body-building 
plant  heretofore  noted  began  operations  in  1925,  and 
straightway  proved  itself  one  of  the  most  successful  of 
the  overseas  operations. 

In  1929  General  Motors,  Ltd.,  took  over  the  selling  and 
general  distribution  of  all  Vauxhall  cars.  The  arrangement 
was  continued  until  1932,  at  which  time  all  products  of 
Vauxhall  Motors,  Ltd.,  were  sold,  as  well  as  manufactured, 
by  the  latter  company.  In  1932  Hendon  had  completely  re- 
versed its  early  procedure;  cranes  that  once  swung  crates 
inward  now  swung  them  outward,  so  that  instead  of  being 
an  import,  unboxing  plant  it  became  an  export,  boxing  plant 
for  the  Vauxhall  products  which  had  been  developed  in  the 

Vauxhall  Motors,  Ltd.,  manufactures  the  Vauxhall,  an 
English  car  of  long-established  reputation,  with  plant  and 
offices  at  Luton;  also  the  Bedford  truck,  an  outgrowth  of 
the  Chevrolet  truck  activities  in  England,  the  change  in 
name  having  occurred  in  1931.  Vauxhall  then  employed 
2,000  men  and  made  1,700  cars  a  year,  with  a  possible 
production  estimated  at  25,000  a  year.  The  Corporation's 
initial  transaction  in  Vauxhall,  requiring  £510,000,  was  con- 
summated November  24,  1925.  The  Corporation  has  since 
enlarged  its  interest,  and  now  owns  a  substantial  propor- 
tion of  the  shares  of  Vauxhall.  Three  new  directors  repre- 
senting General  Motors  were  added  to  the  board.  The  man- 
agement and  personnel  remained  British,  while  Vauxhall 

250  The  Turning  Wheel 

gained  capital,  a  selling  organization,  and  the  benefit  of  re- 
search. More  recently  Vauxhall  began  to  manufacture  low- 
priced  models  of  low  horsepower  to  meet  special  English 
needs.  Sales  activities  of  General  Motors,  Ltd.,  have  been 
taken  over  by  Vauxhall. 

In  the  German  development  were  two  concerns,  known  as 
General  Motors,  G.m.b.H.,  and  Adam  Opel,  A.G.  During 
the  period  of  German  import  restrictions,  the  former  com- 
pany acted  as  a  sales  office  placing  its  orders  with  the  Ex- 
port Company  or  with  either  General  Motors  Continental 
at  Antwerp,  or  International  at  Copenhagen.  When  the 
German  import  restrictions  on  motor  cars  were  lifted,  in 
1925,  a  warehouse  was  secured  at  Hamburg,  and  a  manu- 
facturing base  opened  in  Berlin.  In  April,  1926,  the  first 
Chevrolet  truck  came  out  of  the  assembly.  This  expansion 
was  accomplished  in  the  fact  of  discouraging  conditions  in 
Germany  which  led  to  a  severe  crisis  the  following  winter. 

Adam  Opel,  A.G.,  represents  the  largest  single  invest- 
ment of  General  Motors  overseas,  having  grown  to  its 
present  proportions  through  a  long  history  of  diversified 
manufacture.  The  Opel  workshop  was  founded  at  Riissels- 
heim,  Germany,  in  1862,  for  the  manufacture  of  sewing 
machines.  Opel  began  to  build  wine-making  machinery  in 
1883,  high-wheeled  bicycles  in  1886,  low-wheeled  bicycles 
in  1892,  passenger  motor  cars  in  1899,  motorcycles  in  1901, 
and  motor  trucks  in  1907. 

In  developing  their  plant  the  Opels  drew  on  American 
experience.  Wilhelm  von  Opel,  the  present  head  of  the 
works,  studied  advanced  production  methods  in  the  United 
States  in  1909  and  on  his  return  to  Russelsheim  directed  a 
tremendous  plant  expansion.  Fire  destroyed  the  works  in 
1911,  leading  to  the  end  of  sewing  machine  production. 
Larger  plants  were  soon  erected  and  by  1912,  4,500  per- 
sons were  at  work  in  Opel  factories.  In  1924,  the  conveyor 
system  of  production  was  installed,  following  the  best 
American  practice.  Another  extension  occurred  in  1926 
when  Opel  reached  a  production  of  43,500  cars. 

As  an  industrial  layout,  Opel  approaches  Krupp's  in 
completeness.  Its  equipment  includes  7,000  working  ma- 
chines and  automatics,  more  than  seven  miles  of  standard 

General  Motors  Across  the  Seas      251 

gauge  railroad,  six  locomotives  and  1,800  tip  cars,  30  lift- 
trucks  on  eighteen  transport  lines,  700  loading  platforms, 
40  elevators,  and  30  cranes. 

From  1926  to  1929,  Opel  enlarged  its  Russelsheim  plant 
by  more  than  a  million  square  feet  to  a  total  area  of  more 

Opel  car  in  African  exploration — Schomburgk  Expedition 

than  7,500,000  square  feet,  with  a  daily  capacity  of  500 
motor  cars  and  trucks  and  3,000  bicycles.  Shortly  after 
General  Motors  acquired  its  interest  in  Opel,  in  1929, 
"Blitz"  was  adopted  as  the  trade-name  for  Opel  trucks. 
Export  sales  for  all  Opel  automotive  products  are  handled 
by  the  General  Motors  Export  division. 

252  The  Turning  Wheel 

Opel  is  unique  in  the  Corporation  in  total  amount  of  car 
fabricated  in  one  plant :  body,  radiator,  shock  absorbers, 
fuel  pump,  clutch,  valves^  and  universal  joint.  Exports  in 
1932  were  only  4  percent  below  those  of  the  year  preced- 
ing, and  Opel  cars  accounted  for  slightly  more  than  68  per- 
cent of  German  car  exports.  Geheimrat  Wilhelm  von  Opel 
is  chairman  of  the  board  of  Adam  Opel,  A.G. 

While  the  Export  Company  was  distributing  cars  in  Aus- 
tralia, a  new  tariff  of  nearly  three  hundred  dollars  on  every 
car  body  imported  pushed  prices  of  General  Motors  cars 
skyward.  Faced  with  a  complete  loss  of  its  Australian  trade, 
the  Export  Company  made  a  contract  with  Holden's  Motor 
Body  Builders,  Ltd.,  which  already  did  the  bulk  of  body- 
building for  the  Commonwealth,  besides  handling  a  large 
part  of  General  Motors'  requirements,  practically  all  body 
work  being  done  by  hand.  Cooperation  between  General 
Motors  and  Holden's  brought  forth  a  new  plant,  con- 
tiguous to  the  existing  one  at  Woodville.  In  the  milling  de- 
partment a  progressive  line  for  all  mill  operations  was  set 
up,  including  Linderman  and  other  modern  machines  new 
to  the  Commonwealth.  The  General  Motors  staff,  in  an 
emergency,  built  a  hydraulic  press,  obviating  the  former 
method  of  shaping  body  panels  by  hand.  These  and  other 
machines,  also  wood  kilns,  nickel-plating  and  Duco  depart- 
ments, were  beyond  the  experience  of  workers  there,  and 
it  took  some  persuasion  to  change  their  attitude  regarding 
labor-saving  devices.  Also,  they  had  to  be  instructed  in  the 
use  of  the  new  machinery.  Results  were  highly  beneficial. 
Before  the  end  of  1925  several  thousand  employees  were 
added  for  the  production  of  General  Motors  bodies  ex- 
clusively. In  this  General  Motors-Holden's  enterprise  the 
Corporation  acquired  a  majority  of  the  Common  stock 
in  1931. 

The  expansion  of  overseas  business  depended  on  the 
coordination  of  the  Export  group  and  other  Corporation 
groups,  many  of  which  had  goods  to  sell  in  that  market. 
Field  personnel  gradually  imbued  foreign  dealers  with  the 
spirit  of  American  merchandising  methods,  adopting  the 
policy  of  "Volume — turnover — service."  While  the  total 
number  of  automobiles  a  given  territory  could  absorb  in  a 

General  Motors  Across  the  Seas      253 

year  was  a  matter  of  economics,  "the  percentage  of  General 
Motors  products  to  that  total  was  a  question  of  representa- 
tion and  salesmanship." 

A  world  survey  of  the  automotive  industry  was  under- 
taken in  1925,  with  three  main  questions  to  be  answered: 
Where  were  the  motor  cars  of  the  world  to  be  found? 
How  many  were  there?  Who  sold  them?  Through  1926, 
the  spotting  of  other  assembly  plants  and  warehouses  on 
the  world  map  continued.  The  plants  in  Australia — at  Bris- 
bane, Sydney,  Melbourne,  Adelaide,  and  Perth — date  from 
this  time,  also  those  at  Wellington,  New  Zealand,  and  Port 
Elizabeth,  South  Africa. 

These  formative  years  reveal  some  of  the  motives  actu- 
ating the  Corporation  in  extending  its  overseas  interests 
and  in  creating  its  assembly  plant  structures.  At  first,  of 
course,  it  had  an  eye  to  savings  in  freight  and  duty.  Other 
advantages  made  themselves  felt  in  time  and  proved  of  no 
less  importance.  There  was  the  advantage  of  being  able  to 
ship  cars  and  trucks  abroad  at  a  rate  not  possible  under 
the  old  distributor  system:  heavy  consignments  could  be 
taken,  delivered,  and  financed  at  the  points  of  distribu- 
tion as  part  of  ordinary  procedure.  Another  advantage  en- 
tered with  the  invention  and  development  of  Duco,  by  which 
it  became  possible  for  assembly  plants  to  finish  their  own 
bodies,  with  reference  to  local  demands  in  color,  finish,  and 

At  first  the  Color  division  of  the  Export  Company  con- 
fined its  activities  to  complete  cars  being  shipped  abroad 
(Single  Unit  Packing)  ;  then  the  assembly  plants  took  it  up; 
at  length  the  Color  division  took  over  the  work  of  the  color 

Selection  of  optional  colors  for  each  model  of  car  is  made 
and  finalized  six  months  in  advance  of  any  color  change 
becoming  effective  in  overseas  plants.  Wide  tolerance  in 
colors  is  permitted,  but  those  are  selected  which  are  funda- 
mentally correct  from  the  standpoint  of  harmony  and  good 
taste,  and  which  in  addition  meet  local  preferences.  The 
latter  are  many  and  important.  Red  is  taboo  in  some  coun- 
tries because  of  its  Bolshevist  connotation.  In  Japan 
maroon  cannot  be  used,  because  it  is  the  color  of  the 

254  The  Turning  Wheel 

Imperial  Household,  and  in  China  yellow  is  taboo  because 
it  signifies  mourning  for  death. 

Until  1925,  a  financial  service  was  available  to  overseas 
distributors  generally  from  the  General  Motors  Acceptance 
Corporation  only  through  the  Foreign  Department  located 
in  New  York  City  and,  in  the  British  Isles,  through  the 
London  Branch  established  in  1920. 

In  1925,  at  Antwerp  and  Copenhagen,  General  Motors 
Acceptance  Corporation  began  the  establishment  of 
branches  in  foreign  fields  to  conduct  a  financing  service  for 
overseas  distributors  and  dealers  in  General  Motors 
products  and  also  their  retail  purchasers.  This  service,  so 
valuable  to  the  Export  organization,  has  since  been  ex- 
panded to  include  the  following  General  Motors  Accept- 
ance Corporation  branch  offices:  Alexandria,  Egypt;  Ba- 
tavia,  Java,  D.E.I.;  Bombay,  India;  Buenos  Aires,  Argen- 
tina; Honolulu,  Hawaii;  Osaka,  Japan;  San  Juan,  Porto 
Rico;  South  Melbourne,  Australia;  Wellington,  New  Zea- 
land.- In  addition  to  the  above  direct  branch  offices,  sub- 
sidiary corporations  have  been  organized  to  offer  similar 
services  at:  Copenhagen  by  General  Motors  Acceptance 
Corporation,  Continental;  Mexico  City,  Mexico,  by  Gen- 
eral Motors  Acceptance  Corporation  de  Mexico,  S.A.; 
Russelsheim,  Germany,  by  Allgemeine  Finanzierungs  Ge- 
sellschaft  m.b.H. ;  Sao  Paulo,  Brazil,  by  General  Motors 
Acceptance  Corporation,  South  America ;  London,  by  Vaux- 
hall  and  General  Finance  Corporation,  Limited;  Port  Eliza- 
beth, S.A.,  by  General  Motors  Acceptance  Corporation  of 

Effective  as  of  February  i,  1926,  a  definite  plan  of  organ- 
ization and  management  for  the  Export  group  of  General 
Motors  was  adopted,  on  the  principle  of  staff  and  line 
control.  While  there  had  been  previous  charting  of  activi- 
ties, necessarily  rapid  expansion  had  precluded  any  con- 
tinuous set-up  clearly  revealing  inter-relations,  lines  of 
contact,  and  division  of  authority.  The  Export  group  had 
taken  on  four  general  functions :  manufacture,  sales,  supply, 
and  finance,  for  each  of  which  a  departmental  manager  was 
now  appointed.  The  president  of  the  Export  Company  was 
given  charge  of  all  operations  of  the  Export  division  as  well 

General  Motors  Across  the  Seas      255 

as  the  manufacturing  operations;  on  him  was  placed  re- 
sponsibility for  the  entire  Overseas  Operations  group  to  the 
Corporation,  of  which  he  is  a  vice-president.  In  general  this 
relationship  still  holds.  The  vice-president  of  the  Export 
Company  who  served  as  its  general  manager  was  designated 
also  as  general  manager  of  the  entire  Export  division  (not 
including  the  manufacturing  activities  in  Germany  and 
England).  To  him  the  four  departmental  vice-presidents  of 
the  functions  stated  above  look  for  authority,  each  becoming 
responsible  for  the  control  and  development  of  his  particular 
function  in  all  operating  units  throughout  the  group.  The 
respective  operating  units  were  placed  under  managing 
directors  directly  responsible  to  their  regional  directors, 
who  in  turn  are  responsible  to  the  general  manager  of  the 
Export  division  in  New  York.  At  Opel  and  Vauxhall,  each 
self-contained  in  a  single  territory,  no  such  far-flung  world 
organization  exists,  but  the  functional  set-up  internally  is 
practically  identical.  The  General  Manager  of  each  of  these 
three  major  operating  divisions — the  Opel,  the  Vauxhall, 
and  the  Export  division — reports  to  the  president  of  Gen- 
eral Motors  Export  Company,  who  is  also  vice-president  of 
General  Motors  Corporation  in  change  of  overseas  oper- 

By  the  end  of  1926  General  Motors  overseas  had  rounded 
itself  out.  The  situation  was  then  outlined  as  follows: 

It  becomes  quite  apparent  that  we  have  come,  for  1927,  to  the  next 
phase  of  our  operation,  for  we  are  faced  very  definitely  with  the 
necessity  of  consolidating  the  advances  we  have  made,  and  of 
developing  the  machinery  we  have  set  up  to  the  degree  of  efficiency 
that  will  bring  the  permanent  result  we  are  seeking.  ...  As  a 
group,  we  have  just  about  reached  the  limits  of  our  growth;  few 
markets  of  worthwhile  potentiality  are  now  left  without  individual 
companies,  largely  self-controlled,  installed  on  the  ground  to  carry 
the  tremendous  resources  of  General  Motors  out  directly  to  the 
retail  dealer  and  the  public.  We  can  no  longer  look  for  the  impetus 
to  increase  in  volume  that  the  creation  of  a  new  assembly  plant 
provides.  We  have  established  our  line  organization  on  practically 
every  battle  front.  Any  growth,  any  expansion  hereafter,  must 
come  from  within  these  operating  companies,  and  as  a  direct  result 
of  their  increased  activity.  .  .  . 

256  The  Turning  Wheel 

This  crystallizes  directly  to  a  definition  of  our  objective  in  1927: 
"Ratio  to  total  American  volume,  return  on  investment,  and  car 
inventory  turnover." 

Wherever  General  Motors  cars  go,  other  benefits  go  in 
their  turn.  Group  life  insurance  is  carried  on  all  American 
overseas  employees  of  the  Corporation.  General  Motors 
Acceptance  Corporation  participated  in  the  financing  of 
nearly  50  percent  of  the  Export  division's  1926  volume, 
employing  one  hundred  workers  solely  on  overseas  activi- 
ties. Its  wholesale  and  retail  plans  of  financing  were  in 
operation  in  fifteen  countries,  with  nine  other  countries 
added  in  1927. 

The  year  1927  saw  assembly  manufacturing  started  at 
Batavia  in  Java  and  Osaka  in  Japan,  followed  soon  after, 
early  in  1928,  at  Warsaw,  Bombay,  and  Stockholm.  The 
three  South  American  plants  in  Brazil,  Uruguay,  and 
Argentina  were  placed  in  communication  with  one  another 
by  radio.  In  the  development  of  the  line  and  staff  organiza- 
tion in  1927,  the  Export  Company,  as  an  operating  unit, 
was  put  on  the  same  basis  as  other  individual  plants  in  the 
Export  division,  although  it  remained  the  source  from 
which  the  officers  and  directors  derived  their  corporate 

All  through  this  period  advertising  has  been  pushed  by 
methods  well  known  at  home  and  by  others  keyed  to  char- 
acteristics of  foreign  publics  and  especially  to  their  degree  of 
motor-mindedness.  Motion-picture  films  are  effectively  used. 
The  automobile  show  is  one  of  the  main  reliances  for  put- 
ting General  Motors  products  before  the  eyes  of  populous 
centers;  the  one  at  Brussels  always  constitutes  a  main  event 
in  Continental's  advertising  program.  Sao  Paulo,  which  is 
the  third  largest  city  in  South  America,  was  treated  to  a 
special  General  Motors  exhibition,  which  proved  successful 
as  a  result  of  painstaking  preliminary  and  follow-up  ad- 
vertising, although,  as  pointed  out  in  General  Motors 
World,  March,  1927,  previous  shows  at  Sao  Paulo  and  Rio 
de  Janeiro  had  not  been  productive  of  sales.  This  show  suc- 
ceeded in  bringing  the  closed  car  into  favor  with  the 
Brazilians  is  never  before.  Europeans,  Asiatics,  and  South 

General  Motors  Across  the  Seas      257 

Americans  have  developed  as  keen  an  appetite  for  auto- 
mobile shows  as  have  North  Americans. 

Overseas  the  "show"  frequently  takes  the  form  of  a 
caravan.  Local  advertising  precedes  the  appearance  of  the 
fleet  of  cars  and  trucks  at  the  various  points  scheduled.  To 
the  inhabitants  of  undeveloped  countries  perhaps  the  most 
exciting  of  these  are  the  caravans  organized  to  push  their 
way  into  new  or  partially  exploited  territories.  Cavalcades 
of  General  Motors  cars,  gayly  decorated,  start  from  Ant- 
werp, Copenhagen,  Osaka,  or  Melbourne,  or  some  other 
base,  for  a  long  tour  of  the  hinterland.  They  carry,  in  addi- 
tion to  service  men  and  electricians,  show  troupes,  stage 
and  motion-picture  equipment,  loud  speakers,  field  kitchens, 
and  cafeterias.  They  are  really  sales  and  advertising  expedi- 
tions, painstakingly  equipped  to  maintain  themselves  in  the 
field  and  to  entertain  large  audiences  gathered  with  the  co- 
operation of  local  dealers. 

Perhaps  the  most  imposing  cavalcade  was  that  which 
started  from  New  York  to  show  the  new  v-i6  Cadillac  to 
Europe,  a  feature  of  the  journey  being  the  ceremonial 
Cadillac  visit  paid  to  the  ancient  seat  of  the  Cadillac  family 
in  France.  In  Palestine  and  other  Near  East  areas  the  motor 
cavalcade  has  been  especially  effective  in  bringing  scat- 
tered dealers  into  touch  with  new  models  and  sales  ideas. 

Impressive  endurance  runs  have  been  made  by  General 
Motors  cars  for  the  same  purpose,  the  most  famous  one 
being  the  Cape-to-Cairo  run  by  Chevrolet.  After  crossing 
Africa  from  south  to  north,  this  sturdy  car  went  on  across 
Europe  to  Stockholm,  welcomed  all  along  the  line  and  visit- 
ing all  the  principal  General  Motors  centers.  Chevrolet,  of 
course,  is  the  great  volume  producer  in  the  export  field  as 
in  the  home  market. 

Other  special  features  of  export  publicity,  such  as  the 
round-the-world  trips  of  Buick  and  Frigidaire,  have  united 
the  whole  export  organization  in  synchronized  publicity 
campaigns  on  an  international  scale. 

Direct-mail  advertising  is  a  method  used  by  the  Export 
company  extensively,  the  sales  organization  in  New  York 
serving  those  countries  not  covered  by  assembly  plants.  In 
some  parts  of  the  world  it  may  be  necessary  to  begin  a 

258  The  Turning  Wheel 

sales  campaign  by  offering  proof  that  the  Corporation 
actually  exists  and  makes  cars  that  can  be  bought  locally. 
Witness  the  experience  of  a  sales  representative : 

I  had  thought,  previous  to  going  to  West  Africa,  that  we  were  so 
large  and  important  that  we  must  be  universally  known.  Therefore 
it  was  a  bit  of  a  shock  to  find  that  many  people  were  in  complete 
ignorance  of  our  products.  To  sell  these  people  the  idea  of  General 
Motors  as  a  great  and  unique  institution  was  my  primary  job  and 
I  found  that  after  telling  them  about  our  size  and  strength,  our 
multifarious  manufacturing,  sales  and  financing  activities,  showing 
them  pictures  of  the  Proving  Ground  and  Research  Laboratories, 
it  was  very  much  easier  to  develop  an  interest  in  the  actual  selling 
of  our  cars  and  trucks. 

While  publicity  is  as  much  a  part  of  a  selling  campaign 
abroad  as  at  home,  objectionable  propaganda  is  taboo.  The 
following  incident  may  be  taken  as  an  indication  of  how 
General  Motors  adapts  itself  in  a  foreign  country  to  custom 
and  tradition.  In  1927  General  Motors  Japan  took  over 
premises  at  Osaka,  where  its  predecessors  in  business  had 
established  a  Shinto  shrine.  Though  there  was  no  obligation 
to  do  so,  the  company  restored  it  to  use  and  now  maintains 
it.  Each  year  a  ritual  service  is  held  and  the  mother  temple 
has  named  the  shrine,  "The  White  Chrysanthemum." 

By  May  2,  1927,  the  home  offices  were  finally  quartered 
in  the  General  Motors  Building  at  1775  Broadway.  The 
goal  set  for  1927  overseas  operations  was  reached,  and  a 
policy  of  plant  expansion  began.  It  was  stated  at  that  time 
that  uwe  shall  have  to  work  definitely  toward  identifying 
ourselves  with  each  market."  Further  explained,  General 
Motors  as  an  institution  had  already  assumed  an  interna- 
tional character. 

In  many  countries  General  Motors  is  coming  to  be  looked  upon  as  an 
integral  part  of  the  basic  industrial  life  of  those  countries.  There 
is  not  one  American  in  the  entire  organization  of  Vauxhall  Motors, 
Ltd.,  in  London.  The  daily  business  in  the  office  in  Osaka  is  con- 
ducted by  Japanese,  and  the  native  workmen  are  carrying  on  their 
jobs  under  native  foremen.  The  tendency  to  employ  local  per- 
sonnel, and  to  promote  this  personnel  into  a  position  of  responsi- 
bility and  authority  as  fast  as  it  qualifies,  is  present  everywhere.  It 

General  Motors  Across  the  Seas      259 

is  definitely  General  Motors'  policy  to  award  the  job  to  the  man 
who  merits  it,  whatever  his  nationality. 

Altogether  there  were  nineteen  manufacturing  and  assem- 
bly plants  in  the  Export  division  at  the  close  of  1928,  in 
which  year  the  employees  of  the  Company  averaged 
eighteen  thousand  in  number. 

General  Motors  Export  volume  was  greater  than  the  volume  of  any 
group  of  export  products  going  out  from  the  United  States  with 
three  exceptions.  .  .  .  The  General  Motors  Export  division  also 
did  a  greater  volume  of  business  abroad  than  the  Corporation  did 
domestically  seven  years  before.  General  Motors  had  become  the 
biggest  automotive  concern  doing  business  in  Europe. 

Sales  abroad  of  American-source  products  by  the  export 
organizations  of  General  Motors  for  a  second  four  years  of 
the  modern  development  were : 


Year                 Number  Value 

1926  118,791  $98,156,088 

1927  193,830  171,991,251 

1928  282,157  252,152,284 

1929  256,721  243,046,031 

Since  many  overseas  representatives  usually  come  back 
to  the  United  States  in  the  spring,  a  regional  conference  of 
the  Overseas  group,  attended  by  representatives  from 
twenty-eight  different  countries,  was  held  at  Shawnee-on- 
the-Delaware,  Pennsylvania,  May  22—30,  1929. 

Before  1929  closed,  the  story  of  another  pioneering  effort 
came  out  of  the  Near  East.  There  are  twenty  languages  in 
General  Motors  Near  East  territory.  The  Parts  division 
translated  the  Chevrolet  Parts  Book  into  each  of  the  chief 
languages  used  in  its  territory:  French,  Italian,  Arabic,  and 
Turkish.  The  Turkish  and  the  Arabic  versions  represented 
a  monumental  task.  Arabic  lacked  an  automobile  vocabu- 
lary or  even  the  root  words  upon  which  to  build.  The 
translator's  book  was  praised  by  the  Arabic  press  and  found 
favor  with  government  officials,  such  as  those  of  the 
Egyptian  customs. 

260  The  Turning  Wheel 

Constructive  helps  to  overseas  dealers  in  General  Motors 
products  are  extended  in  three  different  forms:  Service 
School,  Dealer  Accounting,  and  Retail  Sales  School.  When 
dealers  failed  to  send  their  service  men  to  the  plant  school, 
the  Rolling  Service  School  was  established  and  first  took 
the  field  on  wheels  into  Brazil  in  1926.  By  1930  most  of  the 
Overseas  group  had  established  similar  schools  on  wheels. 

General  Motors5  stake  in  world  trade  had  become 
enormous  by  1928,  when  its  sales  overseas  amounted  to  15.6 
percent  of  its  total  business.  General  Motors'  share  of  all 
American  and  Canadian  motor-car  business  abroad  was 
12.4  percent  in  1922,  24.3  percent  in  1926,  and  47.1  per- 
cent in  1928. 

The  peak  passed.  Danger  signals  began  to  fly  abroad  in 
1929.  By  July  the  decline  in  the  sales  of  automobiles  abroad 
set  in.  This  was  to  continue  steadily  through  1932,  and 
for  the  first  two  months  of  1933.  This  decline  was  accel- 
erated in  the  latter  half  of  1929  by  the  fall  of  international 
exchange  and  increasing  disruption  of  world  trade.  In  the 
Export  division's  affairs,  those  markets  termed  neutral,  i.e., 
those  where  there  was  no  major  car  manufacturing,  as  there 
was  in  England,  France,  Germany,  and  Italy,  felt  the  ad- 
verse effects  most  severely,  in  reduced  buying  power  as  well 
as  in  increased  competition  from  other  than  American 

The  sales  account  of  Export  in  these  three  years  of  de- 
cline shows: 


Year                  Number  Value 

1930  164,112  $155,728,304 

1931  125,606  110,525,817 

1932  77,159  64,722,593 

The  attainment  of  these  relatively  satisfactory  sales  in 
1930  to  1932  can  be  attributed  to  a  substantial  increase  in 
the  sales  of  the  Corporation's  German-  and  English-source 
product  in  the  world  markets.  In  1930,  the  first  year  in 
which  these  sales  were  included,  they  accounted  for  20.7 
percent  of  the  Corporation's  overseas  volume,  in  1931  this 

General  Motors  Across  the  Seas      261 

ratio  was  increased  to  31.0  percent  and  further  increased 
in  1932  to  47.7  percent. 

As  early  as  1926,  difficulties — some  already  noted — 
hindered  expansion  of  the  American  export  business.  These 
might  take  the  form  of  political  alliances  and  loans,  import 
quotas,  and  rising  tariffs.  The  United  States  failed  to  im- 
port in  volume  sufficient  to  permit  other  countries  to  pay 
for  our  exports,  and  when  American  investors  ceased  to 
take  foreign  loans,  a  decided  swing  away  from  American 
goods  began.  By  1929  this  trend  threatened  to  become  an 
avalanche  which  the  Overseas  Operations  found  it  could 
meet  best  by  capitalizing  even  more  heavily  on  the  manu- 
facturing sources  it  possessed  in  Europe  to  protect  its 
investment  of  approximately  $68,000,000  in  overseas  busi- 
ness and  to  safeguard  its  distribution  system  with  its  thou- 
sands of  employees  and  its  1,800  dealers — in  the  event  that 
its  American  cars,  for  one  reason  or  another,  should  be  shut 
out  of  these  consumer  markets. 

There  was  also  another  good  reason  for  foreign  manu- 
facturing. While  American  cars  were  being  improved  in 
quality,  they  were  also  being  increased  in  size  and  weight, 
in  contrast  with  European  evolution  toward  small  and  light 
types,  more  economical  to  own  and  operate  in  countries 
where  gasoline  is  expensive,  and  horsepower  taxes  are  high. 
Differences  in  the  tastes  of  foreign  consumers  could  be 
satisfied  by  a  flexibility  of  production  not  possible  at  home. 
Better  geographic  relation  to  some  of  the  major  volume 
markets  also  had  its  influence. 

These  considerations  had  led  the  Corporation  to  become 
interested  in  Great  Britain  as  a  manufacturing  source,  not 
only  because  the  British  Isles  afforded  an  important  and 
stable  market  in  themselves,  but  also  because  the  threat 
against  American  cars  in  foreign  export  fields,  especially 
in  Australasia,  worked  to  favor  British  products.  If  the 
Corporation  were  handicapped  in  those  fields,  its  invest- 
ment would  suffer.  German  manufacture  was  equally  ad- 
vantageous, both  for  the  Reich  and  for  many  sections  of 
Continental  Europe. 

With  the  arrested  growth  of  American-source  volume 
creating  many  investment  problems,  plans  were  made  for  a 

262  The  Turning  Wheel 

realignment  of  the  Corporation's  world-wide  distributing 
structure.  Reduced  to  a  sentence,  the  problem  resolved  itself 
largely  into  one  of  "earning  on  the  investment  made  by 
selling,  in  each  market  and  from  each  source,  the  kind  of 
cars  the  people  in  those  markets  want  and  can  afford  to 
buy."  Such  a  policy  demanded,  in  order  to  achieve  the 
proper  balance,  as  keen  an  interest  in  Vauxhall  and  Opel 
as  in  any  of  its  American  manufacturing  companies. 

Handicaps  against  American-made  cars  abroad  reduced 
America's  share  of  overseas  sales  from  52  percent  in  1929 
to  21  percent  in  1932.  In  his  report  for  the  Overseas  Opera- 
tions group  for  1932,  the  president  commented  as  follows 
on  the  changing  situation: 

The  swing  .  .  .  represents  a  change  in  the  popular  demand  for 
motor  cars  which  is  of  profound  significance  to  General  Motors 
and  to  all  companies  engaged  in  international  trade.  Its  causes 
.  .  .  include  the  basic  economic  disadvantages  which  confront 
America  in  her  present  international  economy;  the  growing  senti- 
ment of  nationalism;  the  increased  duty  advantages  and,  in  some 
cases,  exchange  advantages,  which  have  come  to  prevail  in  favor 
of  foreign  products;  the  rather  normal  trend  toward  a  smaller  and 
more  cheaply  operated  type  of  car  arising  out  of  the  depression ; 
and  most  important  of  all,  the  more  serious  effects  of  the  economic 
depression  itself  upon  those  "Neutral  markets"  throughout  the 
world  where  the  American  car  has  always  been  strongest,  as  com- 
pared with  the  effects  in  the  manufacturing  markets,  where  the 
American  car  has  never,  actually,  accounted  for  a  very  considerable 
proportion  of  the  business. 

With  English  and  German  production  sources  as  its  de- 
fence, General  Motors  was  able  to  "soften  the  drop"  in  the 
total  volume,  and  in  the  later  months  of  1932  these  sources, 
including  the  products  consumed  domestically  in  England 
and  Germany,  were  exceeding  the  American-source  volume 
in  General  Motors'  total  overseas  trade.  Despite  these  bul- 
warks, however,  General  Motors  unit  sales  abroad  fell  38 
percent  below  those  for  the  preceding  year,  but  at  a  decreas- 
ing rate  as  1932  went  along. 

Of  the  total  American-source  business  General  Motors 
held  its  own  in  1932  with  33.9  percent,  while  its  German 

General  Motors  Across  the  Seas      263 

and  English  sources  as  against  the  volume  from  all  foreign 
sources  tended  to  increase  their  percentage,  and  amounted  to 
7.1  percent.  Adam  Opel,  A.  G.,  in  1933  marked  up  its  first 
operating  profit.  In  England,  following  Britain's  departure 
from  the  gold  standard,  Vauxhall  realized  its  greatest 
volume  and  profit,  through  putting  out  a  low-powered  car 
more  in  line  with  English  demand. 

The  source-distribution  of  General  Motors  unit  sales  in 
the  three  Territorial  divisions  of  the  Overseas  Operations 
showed  the  following  percentages  for  1932: 

American        English 

Source  Source 

Percent          Percent 

Export  Division 
English  Division 
German  Division 

Total  Overseas 




10. 1 







1 00.0 


In  the  early  months  of  1933  the  Export  pendulum 
started  its  up-swing.  Overseas  shipments  of  General  Motors 
American-source  cars  were  45  percent  greater  in  the  first 
six  months  of  1933  than  in  the  corresponding  period  of 
1932.  June  shipments  were  133  percent  greater  in  1933 
than  in  June,  1932.  Sales  of  foreign  source  products  by 
Opel  and  Vauxhall  also  advanced  during  this  period. 

General  Motors'  export  selling  reflects  careful  choice  of 
distributors  and  dealers  and  a  study  of  local  needs;  for  each 
country,  having  its  own  peculiar  methods  of  doing  business, 
must  be  handled  separately,  although  a  casual  survey  might 
class  it  with  some  other  country  on  the  basis  of  like  volumes 
of  sales.  In  most  territories  General  Motors  products  are 
sold  on  an  exclusive  basis.  Building  up  the  reputation  of 
products  is  found  to  be  slow  work,  and  the  quality  of  the 
retail  outlet  no  less  important  than  the  quality  of  the 
product.  Withal,  it  must  be  recognized  that  the  first  con- 
sideration of  the  car  buyer  in  many  overseas  areas,  and 
especially  in  Europe,  is  economy  of  operation. 

264  The  Turning  Wheel 

The  world  contains  eighteen  times  the  population  of  the 
United  States  yet  only  28  percent  of  the  motor  cars  are 
outside  the  United  States,  which  has  a  car  per  5.1  persons 
as  against  one  for  about  two  hundred  people  over  the 
planet.  America's  opportunity  to  sell  motor  cars  abroad 
seems  still  large,  but  there  are  limitations.  An  extract  from 
a  brochure,  The  Export  Organization  of  General  Motors, 
1929  revision,  sets  forth  some  of  these  limiting  factors  over- 
seas, where 

.  .  .  the  motor  car  has  not  been  generally  accepted  as  an  essential 
utility  as  in  the  United  States.  Tariff  and  cost  of  freight  and 
handling  add  on  the  average  33  percent  to  the  retail  delivered  price 
of  the  car,  compared  to  the  delivered  price  in  the  United  States. 
...  A  Buick  owner  overseas  is  in  the  price  class  of  the  Cadillac 
owner  in  this  country.  .  .  .  Taxes  are  high  and  the  cost  of 
gasoline,  oil,  tires  and  other  items  make  the  operation  of  a  car 
expensive  by  comparison  with  what  it  costs  to  operate  in  America. 

The  idea  of  the  auto  is  an  expanding  factor,  breaking 
the  barriers.  The  new  countries  of  European  settlement 
which  have  developed  exportable  surpluses  stand  in  the 
first  rank  as  regards  cars  per  capita  of  population;  those 
of  primarily  British  stock  are  sometimes  spoken  of  as  being 
saturated:  United  States,  Canada,  South  Africa,  Australia, 
and  New  Zealand.  Their  use  of  motor  cars  is  not  likely, 
for  some  time  to  come,  to  be  approximated  by  countries  on 
other  standards  of  living,  and  under  less  favorable  eco- 
nomic conditions. 

By  comparison  with  her  neighbors  to  the  west,  the  Ger- 
man Reich  has  only  a  half  to  one  third  the  cars  that  might 
be  expected.  Latin  Europe,  except  for  France,  is  not  even 
that  well  off  in  motor  cars  and,  outside  of  Scandinavia, 
central  and  eastern  Europe  are  poorly  supplied.  Yet  there 
are  bright  spots  the  world  around  where  the  automobile 
has  come  to  be  regarded  as  the  necessity  it  is  in  the  United 
States,  although  the  hinterlands  even  of  these  countries  have 
comparatively  few  cars.  These  areas  are  hopeful  territories 
for  cultivation  in  the  future. 

In  February,  1933,  a  policy  of  more  fully  decentralized 
management  went  into  effect.  Four  regional  directors — for 

General  Motors  Across  the  Seas      265 

Europe,  for  South  America  and  South  Africa,  for  the  Far 
East,  and  for  Australasia — became  responsible  for  all 
operations  in  their  respective  areas.  They  maintain  head- 
quarters at  the  home  office  in  New  York. 

Through  its  far-flung  organization,  General  Motors 
meets  all  the  civilized  peoples  of  the  earth.  Into  many  and 
varied  social  settings  it  has  introduced  its  products  through 
representatives  carefully  selected  from  the  standpoint  of 
character  and  understanding  of  the  peoples  among  whom 
they  are  to  work.  In  extensive  manufacturing  and  assembly 
operations  employing  domestic  labor,  the  Corporation  ap- 
plies both  the  factory  technique  and  the  labor  policies  de- 
veloped at  home.  Care  is  taken  to  train  native  staffs,  to  the 
end  that  General  Motors'  overseas  operations  may  become 
a  part  of  the  local  scene  to  as  large  an  extent  as  possible. 

While  the  motor  car  is  a  tool  which  inevitably  hastens 
social  changes  by  enlarging  the  radius  of  human  action  and 
expanding  the  vistas  of  mankind,  an  attempt  has  been  made 
to  effect  its  entry  into  new  scenes  without  affront  to  existing 
manners  and  customs.  The  result  is  that  General  Motors 
has  escaped  difficulties  due  to  nationalist  feeling,  and  can 
count  citizens  of  all  governments  among  its  valued  friends. 
As  highways  are  gradually  improved  and  lengthened,  as 
international  trade  resumes,  General  Motors  Export  will 
press  on  to  more  and  more  mutually  helpful  contacts  with 
all  sorts  and  conditions  of  men  who,  whatever  their  sur- 
roundings, have  in  common  the  desire  for  rapid  transport 
and  the  conveniences  of  a  motorized  civilization. 

Chapter   XIX 



.HE  automobile,  as  we  have  seen,  came  to  pass  as  the  re- 
sult of  a  long  evolution.  At  every  stage  the  pioneers  were 
handicapped  by  faulty  materials,  lack  of  capital,  adverse 
public  opinion  and  man's  general  ignorance  of  the  forces  of 
nature.  Some  of  their  efforts  appear  almost  childish  today, 
when  the  laws  of  matter  and  force  have  been  tested  and 
recorded  in  an  imposing  body  of  knowledge  which  grows 
day  by  day.  But  before  we  indulge  in  a  pitying  smile  for 
their  makeshift  arrangements,  let  us  recall  that  the  book 
of  science  is  by  no  means  closed,  and  that  at  some  distant 
day  the  very  achievements  on  which  modern  man  so  prides 
himself  will  no  doubt  be  considered  inconsequential. 

When  the  history  of  America  is  written  centuries  hence, 
it  will  be  noted  that  in  the  first  quarter  of  the  twentieth 
century  business  began  to  subsidize  scientific  research.  That 
resounding  fact  may  then  be  considered  more  important 
than  any  of  the  political  or  military  events  of  our  era.  The 
laboratory,  where  trained  men  work  quietly  amid  controlled 
conditions,  is  a  seed-bed  of  social  and  political  change  as 
well  as  of  scientific  experiment. 

Until  recently,  science  was  usually  described  as  of  two 
sorts:  pure  science  and  applied  science.  Pure  science  was 
held  to  be  the  fruitage  of  a  disinterested  search  for  truth 
into  which  no  profit  element  entered  and  from  which  no 
practical  benefit  was  expected.  Work  of  this  nature  depended 
for  support  upon  university  or  other  foundations,  or  upon 


Research  267 

the  private  means  of  investigators.  The  purest  of  the  pure 
scientists  sometimes  congratulated  themselves  on  the  pros- 
pect that  what  they  discovered  could  never  be  of  the  slight- 
est use  to  anyone.  In  this  respect,  at  least,  the  pure 
scientists  are  defeated  men,  despite  their  triumphant  con- 
tributions to  knowledge. 

There  is  a  driving  force  in  human  nature  which  makes 
the  pure  science  of  yesterday  the  applied  science  of  today. 
Even  celestial  research  sometimes  comes  down  to  earth. 
Helium  was  discovered  in  the  sun,  through  spectrum  an- 
alysis; thereupon  its  presence  on  the  planet  was  assumed, 
and  after  many  years  helium  gas  was  found  in  such  quan- 
tities on  earth  that  it  is  today  a  commercial  product  and  a 
factor  in  aviation  and  world  politics.  Years  of  pure  scientific 
research  on  energy  waves  preceded  the  practical  application 
of  that  knowledge  through  radio,  with  the  result  that  every- 
man's  home  now  shares  in  the  results  of  what  was  once  pure 

Application  of  scientific  knowledge  to  everyday  life  pro- 
ceeded for  several  generations  largely  through  the  training 
which  the  colleges  and  universities  gave  in  their  professional 
courses.  Once  a  man  was  graduated,  he  was  cut  off  from 
laboratory  opportunity  and  association  with  minds  keyed 
to  research.  The  tendency  was  for  him  to  consider  that 
scientific  progress  ended  as  of  the  day  he  lost  contact  with 
it.  Of  course  there  were  notable  exceptions  to  this  gen- 
eralization in  all  the  learned  professions,  especially  in  medi- 
cine and  chemistry.  But  a  mind  of  unusual  resiliency  marked 
the  man  who,  faced  with  practical  problems  in  engineering 
day  after  day,  continued  to  peer  behind  the  veil  which  hid 
the  unknown.  Lesser  minds  might  make  minor  innovations 
as  they  coped  with  novel  tasks,  but  a  long  and  steady  drive 
on  an  objective  which  might  never  be  found  was  usually 
beyond  the  resources  of  the  individual  worker  or  his  em- 
ployer. Meantime,  the  independent  inventor  and  investiga- 
tor struggled  along  by  himself,  without  backing,  living 
largely  upon  hope  of  developing  something  patentable. 
After  securing  a  patent,  he  had  to  look  far  and  wide  for 
someone  with  capital  enough  to  bring  it  to  market.  Great  as 
the  achievements  of  these  men  were,  industries  growing  in 

268  The  Turning  Wheel 

volume  year  by  year  could  hardly  depend  upon  such  random 
activities  to  produce  the  continuous  improvements  in  tech- 
nique upon  which  both  earnings  and  market  leadership  de- 
pended. Consequently  General  Motors,  in  common  with 
other  large  corporations,  undertook  the  financing  of  scien- 
tific research. 

It  should  be  noted,  however,  that  while  this  research  con- 
cerns itself  with  long-reach  problems  involving  many 
branches  of  science  and  which  may  be  years  in  process  of 
solution,  the  engineering  staffs  of  the  various  subsidiaries 
attack  with  equal  energy  the  problems  involved  in  improv- 
ing models  from  year  to  year.  Not  only  do  the  divisional 
staffs  commercialize  research  findings  and  ascertain  their 
practical  applications,  but  they  also  originate  and  put 
through  important  innovations  on  their  own  account,  either 
independently  or  in  concert  with  other  staffs.  Among  the 
outstanding  contributions  of  General  Motors  in  the  re- 
search field  are  the  following,  some  of  which  have  been  the 
work  of  the  Research  Laboratories,  some  the  work  of 
divisional  staffs,  and  others  the  result  of  joint  efforts  be- 
tween the  Laboratories  and  the  divisions : 

1909-10  Battery  ignition  (Delco  and  Remy). 

1911  One-piece  spark  plug  shell  ( AC ) . 

1911-12  Self-starter  (Delco).  First  used  on  Cadillac. 

1915  Tilt-beam  headlights.  First  used  on  Cadillac. 

1920  Cellular  type  radiator,  of  ribbon  stock  (Har- 

1923  V-type  fan  belt  (General  Motors  Laboratories) 

first  used  on  Frigidaire  and  Chevrolet. 

1923-24  Perfecting  four-wheel  brakes  for  quantity  pro- 
duction (Buick). 

1923-24  Ethyl  "knockless"  gasoline,  developed  by  Gen- 
eral Motors  Laboratories. 

1924  Harmonic    balancer,    to    eliminate    difficulties 

caused  by  torsional  crankshaft  vibration. 
Duco  lacquer  finish. 

1925  Crankcase  ventilation.  First  used  on  Cadillac. 
Thermo-control      of      water-cooling      system 


Research  269 

1926  Balancing  crankshafts  in  quantity  production. 

1927  Chromium  plating.  First  used  on  Oldsmobile. 
Engine-driven  fuel  pump. 

1928  Synchro-mesh  transmission  (Cadillac). 
1930         Silent  poppet  valve  mechanism  (Cadillac). 
1930—31   Carbureter  intake  silencer  (AC). 

1932         Automatic  choke.  First  used  on  Oldsmobile. 

Super-safe  headlights.  First  used  on  Cadillac. 
1932-33  Fisher  no  draft  ventilation. 
1933-34  "Knee-action"    front    springs,    and    improved 
weight  distribution. 

General  Motors'  first  move  toward  the  creation  of  a  re- 
search laboratory  serving  all  constituent  companies  was 
taken  by  President  James  J.  Storrow  in  January,  1911, 
when  he  conferred  with  Arthur  D.  Little,  Inc.,  of  Cam- 
bridge, Massachusetts,  on  the  advisability  of  setting  up  a 
centralized  testing  and  research  laboratory  and  technical 
department.  The  Little  company's  plan  was  accepted  on 
February  7,  1911.  Until  November  of  that  year,  the  re- 
search organization  was  known  as  the  Engineering  De- 
partment; thereafter  as  the  General  Motors  Research 
Department.  After  one  year  this  department  was  placed 
on  its  own  feet,  the  Little  connection  being  changed  from 
management  to  consultation. 

Among  the  problems  studied  by  this  early  research  staff 
in  Detroit  were  painting,  lubricating  and  cutting-oil  prac- 
tices in  various  plants,  tests  of  materials  for  purchasing 
departments,  and  investigation  of  new  parts  and  accessories 
submitted  to  General  Motors  by  outsiders.  The  original 
research  staff  consisted  of  nine  technicians  and  their  as- 
sistants. It  was  in  this  small  laboratory,  according  to 
Arthur  D.  Little,  Inc.,  that  the  electro-dynamometer  was 
first  made  use  of  in  the  automobile  industry. 

The  World  War  stimulated  industrial  research  by  lifting 
technical  and  scientific  problems  to  the  importance  of  life- 
and-death  matters.  Germany  hitherto  had  led  the  world  in 
the  close  cooperation  of  industry  and  science,  a  partnership 
encouraged  by  the  government.  Suddenly  the  rest  of  the 
world  realized  that  it  had  been  laggard  in  this  respect. 

270  The  Turning  Wheel 

Everywhere  in  America  the  man  of  science  took  on  a  new 
importance,  and  nowhere  did  he  find  a  warmer  welcome 
than  among  alert  industrialists.  This  enthusiasm  outlived 
the  war  and  continues  unabated. 

It  was  in  this  period  that  General  Motors  undertook 
seriously  the  organization  and  financing  of  scientific  re- 
search, by  taking  over  the  Dayton  Engineering  Labora- 
tories Company  and  organizing  on  that  base,  as  of  June  12, 
1920,  the  General  Motors  Research  Corporation,  incor- 
porated in  Delaware  for  $100,000,  with  all  the  stock  owned 
by  the  General  Motors  Corporation.  In  that  way  it  took 
a  short  cut  to  a  desired  objective,  as  the  Dayton  Engineer- 
ing Laboratories  Company,  long  active  in  the  scientific  side 
of  the  automobile  industry,  possessed  a  competent  equip- 
ment and  tested  staff. 


When  one  speaks  of  General  Motors  Research,  the  pic- 
turesque character  and  record  of  "Boss"  Kettering  leap  to 
the  mind.  Charles  Franklin  Kettering  was  born  on  a  farm 
in  Ashland  County,  Ohio,  near  Loudonville,  on  August  29, 
1876.  He  passed  in  turn  through  district  school,  Loudon- 
ville High  School,  the  Normal  School  at  Wooster,  Ohio. 
Determined  to  work  his  way  through  all  available  institu- 
tions in  the  neighborhood,  he  was  graduated  from  Ohio 
State  University  in  1904,  at  the  age  of  twenty-eight,  his 
education  having  been  interrupted  by  outside  work. 

Research  271 

After  teaching  school — as  a  teacher  he  must  have  been 
full  of  surprises — he  entered  the  telephone  business  at 
almost  its  lowest  rung,  as  installation  man  for  the  Star 
Telephone  Company  of  Ashland,  Ohio.  To  this  day,  by  way 
of  illustrating  the  need  for  efficiency  in  humble  tasks,  he  is 
apt  to  tell  his  hearers  how  he  discovered  there  is  a  right 
and  a  wrong  way  of  digging  post-holes.  It  is  of  record  that 
he  almost  bankrupted  his  company  by  installing  what  his 
directors  thought  was  too  large  a  switchboard,  but  events 
showed  he  was  right,  business  flowing  in  to  use  the  plant 
once  it  was  installed.  Looking  far  ahead  is  a  Kettering 
habit  and  characteristic. 

From  telephones  and  Ashland  he  went  to  cash  registers 
and  Dayton,  the  city  where  he  found  opportunity  to  reach 
full  stature.  National  Cash  Register  was  then  the  last  word 
in  specialty  manufacturing  and  sales  promotion.  Its  general 
manager  was  E.  A.  Deeds,  who  recognized  Kettering's 
genius,  and  promoted  him  to  head  of  the  Inventions  De- 
partment. There  Kettering  developed  and  patented  a  num- 
ber of  improved  cash  registers,  including  one  operated  by 
electricity  which  did  not  come  into  full  use  until  several 
years  later. 

With  Colonel  Deeds's  backing,  and  that  of  other  Dayton 
capitalists,  the  Dayton  Engineering  Laboratories  Company 
was  organized  in  1911.  While  Delco,  as  it  was  called,  stood 
ready  to  tackle  any  problems  in  electrical  or  mechanical 
engineering,  its  chief  point  of  attack  was  Kettering's  long- 
considered  and  epoch-making  idea  of  an  electric  self-starter 
for  automobiles.  He  believed  that  the  same  power  which 
switched  on  an  automobile's  lights  and  ignited  its  gasoline 
also  could  be  used  to  start  the  engine,  thereby  eliminating 
the  nuisance  of  hand-cranking. 

Starting  an  engine  by  hand  was  difficult  and  often 
destructive  of  temper  and  clothes.  It  required,  usually,  a 
combination  of  physical  vigors  not  always  found  in  the  same 
individual — the  strength  of  Ajax,  the  cunning  of  Ulysses, 
and  the  speed  of  Hermes.  Ulysses  had  to  adjust  the  spark 
and  throttle  just  so;  Ajax  had  to  turn  the  engine  over,  some- 
times over  and  over;  and  Hermes  had  to  dart  back  like  a 
flash  to  the  controls  to  advance  the  spark  and  regulate  the 

272  The  Turning  Wheel 

gas  before  the  engine  went  dead  again.  Not  everyone 
possessed  all  these  qualifications;  many  an  ardent  motorist 
of  today  despaired  of  ever  learning  the  difficult  art  of 
cranking,  and  the  whole  back-breaking  operation  was  quite 
beyond  the  powers  of  all  women  save  those  of  Amazonian 
proportions.  This  was  a  serious  matter  for  the  industry; 
serious,  too,  were  the  physical  accidents  incidental  to 
cranking.  The  commonest  of  these  was  the  broken  wrist 
caused  by  the  back-firing  of  the  engine;  but  more  serious 
hurts,  sometimes  even  deaths,  followed  the  forward  charge 
of  the  car  upon  the  cranker  when,  as  often  happened,  the 
engine  had  been  left  in  gear.  It  was  an  accident  of  that  sort 
which  gave  Delco  its  first  commercial  opportunity. 

Mr.  Kettering  says  Delco's  greatest  obstacle  was  the 
closed  mind  he  encountered  nearly  everywhere  he  went. 
First,  the  battery  manufacturers  said  his  idea  of  self-start- 
ing was  absurd,  for  the  simple  reason  that  no  electric 
storage  battery  could  be  built  with  enough  capacity  to  turn 
a  motor  over.  Why,  they  did  not  say;  the  fact  that  no  such 
battery  had  ever  been  built  was  enough  to  convince  them 
that  it  never  could  be  done.  They  accepted  their  frame  of 
experience  as  final.  In  effect,  they  said,  "There  ain't  no  such 
battery,"  and  let  it  go  at  that.  Finally  Kettering  had  to 
explain,  cajole,  and  bully  them  into  making  bigger  and 
better  batteries. 

Meantime,  Delco  was  trying  to  sell  its  self-starter  idea 
to  manufacturers.  They,  too,  had  the  closed  mind.  The 
thing  might  work  for  a  while,  but  it  would  soon  exhaust 
the  battery.  Then  how  about  the  lighting  and  ignition?  And 
what  if  it  wasn't  positive?  "Positive"  was  a  great  word  in 
those  days.  If  a  thing  wasn't  positive,  it  might  be  a  bad 
buy;  it  often  was.  Finally  Kettering  got  his  chance,  directly 
as  a  result  of  one  of  those  accidents  common  to  hand- 
cranking.  An  elderly  friend  of  Henry  M.  Leland,  founder 
of  Cadillac,  was  driving  a  Cadillac  on  Belle  Isle  bridge  when 
the  motor  stalled.  Forgetting  to  throw  out  the  clutch  before 
cranking  the  car,  he  sustained  serious  injuries.  Mr.  Leland's 
grief  over  this  accident  drove  him  to  encourage  Kettering, 
and  to  give  the  Delco  starting,  lighting,  and  ignition  system 
a  chance.  On  February  27,  1911,  the  first  Delco  starter  was 

Research  273 

installed  on  a  Cadillac  car.  It  worked  so  well  that  in  1912 
Delco  was  standard  equipment  on  all  Cadillac  cars.  Self- 
starting  had  arrived. 

Other  self-starters  soon  appeared  on  the  market;  in  fact, 
more  than  one  man  was  working  along  that  line  when  Ket- 
tering  was  doing  his  pioneer  work.  Various  systems  of  self- 
starting  had  been  worked  out  before  Kettering  applied 
electricity  to  the  task — among  them  compressed  air,  springs, 
and  acetylene  gas.  Other  electrical  manufacturers,  notably 
the  Halbleib  brothers  at  Rochester  in  their  North  East 
plant,  had  worked  out  ways  of  doing  the  job  about  the  same 
time  as  Kettering  did.  But  in  the  ensuing  litigation,  the 
Delco  patents  held  firmly  enough  to  establish  the  priority 
of  self-starting  with  Kettering  and  Delco. 

With  men  of  the  Kettering  stamp  one  thing  leads  to  an- 
other with  almost  lightning  rapidity.  This  has  hardened  into 
a  code  based  on  experience.  Among  the  Kettering  apho- 
risms, the  value  of  time  and  the  need  for  swift  mental 
change  are  emphasized  again  and  again.  "Unless  we 
progress  from  year  to  year  we  lose  ground."  "Today's 
dream  is  tomorrow's  actuality."  "Changes  are  born  in  men's 
minds  and  worked  out  in  laboratories."  Against  a  mental 
background  of  that  kind,  standing  pat  with  the  Delco  start- 
ing, lighting,  and  ignition  system,  no  matter  how  successful 
it  was,  would  be  merely  standing  still.  The  new  idea  came 
from  a  customer  who  had  used  his  Cadillac  to  light  his 
summer  cottage  in  an  emergency.  He  wrote  in  to  buy  a 
Delco  system  for  domestic  use.  The  result  was  Delco-Light, 
an  electric  power  plant  especially  designed  for  farm  and 
rural  residences,  another  company  being  formed  for  its 
manufacture  by  the  swift-moving  Daytonians.  From  Delco- 
Light  they  went  on  to  other  electric-power  adaptations  for 
the  rural  market,  establishing  the  Domestic  Engineering 
Company.  Another  of  their  corporate  creations  was  Dayton 
Metal  Products  Company.  The  Dayton-Wright  Airplane 
Company,  manufacturing  airplanes  during  the  war,  was  an- 
other important  development  established  by  this  enterpris- 
ing group  of  Ohio  industrialists. 

In  1916  W.  C.  Durant  took  over  the  Dayton  Engineering 
Laboratories  Company  as  part  of  his  United  Motors 

274  The  Turning  Wheel 

merger,  and  with  that  group  it  became  part  of  General 
Motors  in  1918.  The  associated  companies  in  which  Mr. 
Kettering  was  a  leading  factor  followed  the  Laboratories 
into  the  General  Motors  fold  within  the  next  few  years. 
Meantime  Mr.  Kettering  had  been  commissioned  to  set  up 
and  direct  research  operations  for  the  Corporation  at  Day- 
ton, under  the  name  of  General  Motors  Research  Labora- 
tories. This  was  incorporated  as  General  Motors  Research 
Corporation,  June  12,  1920,  and  transferred  to  Detroit  in 
1925,  where  it  now  occupies  a  specially  constructed  build- 
ing directly  back  of  the  central  offices  of  the  parent  cor- 
poration. General  Motors  Research  Corporation  is  now 
inactive,  the  operation  being  conducted  as  a  department  of 
the  Corporation  under  the  title,  "Research  Section,  General 
Motors  Corporation." 

The  Research  Building  houses  all  the  Laboratories' 
equipment  under  one  roof.  It  contains  chemical  and  physical 
laboratories,  shops,  drafting  rooms,  library,  and  all  other 
necessary  facilities.  An  eleven-story  building,  it  is  the  third 
occupied  by  the  Laboratories,  the  others  being  outgrown 
by  the  expanding  enterprise. 

To  clarify  the  story  of  research,  the  Laboratories  re- 
cently issued  a  booklet  prepared  by  its  engineers  and 
scientists.  It  states : 

The  greater  part  of  the  engineering  and  research,  which  makes 
General  Motors  cars  better,  is  carried  on  by  the  engineering 
departments  of  its  car  manufacturing  divisions.  But,  in  addition, 
the  divisions  have  the  Research  Laboratories  to  help  them  when- 
ever and  however  possible. 

The  Research  Laboratories  act  in  a  consulting  capacity  to  the 
divisions,  and  are  continually  searching  for  new  principles  and 
ideas  of  a  more  fundamental  and  scientific  nature  than  would  be 
possible  for  any  of  the  individual  engineering  departments,  which 
must  be  more  concerned  with  immediate  production  problems. 

How  the  various  departments  and  sections  of  the  Re- 
search Laboratories  work  out  specific  problems  may  be  seen 
with  reference  to  some  of  the  more  important  contributions 
of  General  Motors  research.  Take,  for  instance,  crankcase 

Research  275 

ventilation — one  of  the  meritorious  achievements  in  motor- 
car advancement  during  the  last  decade.  Complaints  from 
motorists  each  spring  showed  a  seasonal  tendency  toward 
balky  motors  and  stretched  timing  chains.  These  early 
spring  troubles  attacked  cars  which  had  been  conservatively 
driven,  rather  than  those  pushed  at  top  speed  with  accom- 
panying high  engine  temperatures.  The  affected  parts,  upon 
examination,  showed  a  reduction  in  size  beyond  that  to  be 
expected  from  ordinary  wear  and  tear. 

In  the  Chemical  section,  undersized  and  heavily  pit- 
marked  parts  were  analyzed.  The  chemists  found  sulphate 
of  iron  in  unusual  quantity,  and  immediately  recognized 
that  sulphur  was  the  villain  in  the  piece.  They  set  out  to 
determine  the  relation  of  sulphur  in  the  fuel  to  the  weather 
conditions  of  winter  and  early  spring.  The  explanation  was 
eventually  found.  When  a  gasoline  engine  is  cranked  again 
and  again  in  cold  weather,  as  it  frequently  must  be,  water 
condenses  on  the  cold  cylinder  walls  and  trickles  down  into 
the  crankcase.  This  water  comes  from  the  burning  of  the 
fuel  and  air  in  the  engine — about  one  gallon  of  water  for 
every  gallon  of  fuel.  During  the  process  of  fuel  consump- 
tion, the  sulphur  in  the  fuel  is  being  burned,  forming  oxides 
of  sulphur  which,  united  with  the  water,  condensed  in  the 
engine  to  form  sulphurous  or  sulphuric  acid.  This  acid  was 
corroding  the  metal  parts,  wasting  away  the  chains,  and 
eating  the  piston  pins  and  camshaft.  Even  in  diluted  form, 
the  acid  slowly  etched  nearly  all  moving  parts  of  the  engine. 

It  is  one  thing  to  find  trouble;  another  to  correct  it.  Water  is  a 
by-product  of  the  process  of  getting  power  from  fuel.  It  was  not 
possible  to  keep  out  the  water,  nor  was  it  practical  to  eliminate 
sulphur  entirely  from  the  fuel. 

The  chemists  reasoned  that  since  they  could  not  stop  the  acid 
from  forming,  they  must  prevent  the  acid  from  coming  into  contact 
with  the  metal  parts  of  the  engine,  for  the  trouble  arose  only  when 
acid  touched  metal.  .  .  .  Open-minded  toward  the  application  of 
the  commonplace  to  the  intricate,  the  chemists  put  this  to  the  test. 
To  keep  the  air  in  the  engine  continuously  clean  and  free  from 
acids,  why  not  open  the  windows? 

So  they  put  windows,  so  to  speak,  in  the  crankcase.  And  crank- 
case  ventilation  put  an  end  to  "spring  fever"  in  the  automobile. 

276  The  Turning  Wheel 

This  is  a  shining  example  of  the  work  done  in  the  chem- 
istry of  automobile  progress.  From  first  to  last,  from  proc- 
essing of  raw  materials  to  the  last  gallon  of  gasoline 
consumed  before  the  car  goes  to  the  junk  yard,  the  auto- 
mobile is  a  chemical  device.  As  the  Laboratories  put  it: 

.  .  .  The  materials  entering  into  its  construction,  the  fuel  that  makes 
it  go,  and  the  oil  that  lubricates  it  are  chemicals.  Iron,  Copper, 
Lead,  Tin,  Carbon,  and- Tungsten  are  used  in  the  electrical  system. 
Iron  and  Steel  make  the  chassis  strong  and  durable.  Babbitt  and 
Bronze  are  used  for  bearings.  Wood,  Glass,  Cotton,  Wool,  Nitro- 
cellulose, and  Rubber  go  into  a  body.  Oxygen  unites  with  the 
Hydrogen  and  Carbon  of  the  gasoline  and  furnishes  the  power  to 
propel  the  car.  The  Chemical  Section  of  the  Research  Laboratories 
finds  ways  to  improve  and  make  better  use  of  these  chemical 

Fuel  is  so  important  an  element  in  the  motoring  problem 
that  it  receives  the  undivided  attention  of  a  special  section. 
There  goes  on  the  steady  search  for  more  economical  fuel 
consumption.  Fuel  research  is  marching  toward  greater 
power  and  more  miles  per  gallon,  a  fact  which  is  reassuring 
in  view  of  the  frequent  announcements  of  dwindling  oil 
supplies  and  prophecies  of  future  oil  famines. 

In  the  field  of  fuel  research,  an  outstanding  develop- 
ment has  been  the  creation  of  Ethyl  gasoline.  One  of  the 
first  barriers  to  progress  in  fuel  research  was  the  "knock." 
The  knock  had  to  go  before  fuel  research  could  proceed 

After  years  of  research,  a  specific  cure  for  the  knock  was 
discovered.  The  story  of  the  discovery  of  Ethyl  illustrates 
how  a  great  laboratory  feels  its  way  along  from  one  stage 
to  another,  applying  the  old  method  of  trial  and  error  but 
with  greater  speed  and  precision,  until  at  last  by  process  of 
elimination  it  evolves  a  specific  remedy  for  particular  ail- 
ments even  though  it  may  not  have  discovered  the  funda- 
mental cause  of  the  trouble. 

Chemists  noticed  that  ordinary  combustion  of  gasoline 
produced  a  bluish  flame,  while  knocking  combustion  pro- 
duced yellow  or  orange  flame.  They  thought  that  if  the 
gasoline  were  darkened  the  knocking  might  be  prevented, 



because  darker  color  might  absorb  more  of  the  radiated 
heat  from  cylinder  walls.  Trying  one  coloring  matter  after 
another,  they  concluded  that  certain  coloring  agents  were 
effective  on  knocks  because  of  their  chemical  properties  and 
not  because  of  their  colors.  Effective  knock  suppressors  were 
found  to  be  closely  grouped  from  the  standpoint  of  atomic 
weights.  So  it  was  decided  to  try  the  neighboring  elements 
in  the  atomic  scale. 

Research  Building — home  of  General  Motors  Research 
Laboratories,  Detroit 

One  of  these,  tellurium,  gave  Thomas  Midgeley,  Jr.  the 
key  to  the  riddle.  By  eliminating  other  possibilities  he  con- 
cluded that  the  best  available  anti-knock  agent  was  tetra- 
ethyl  lead.  Although  composed  of  cheap  elements,  lead, 
carbon  and  hydrogen,  the  compound  was  rare,  because  it 
had  little  commercial  use  and  was  not  produced  in  quantity. 
Other  chemists  aided  in  bridging  this  gap.  Now  it  costs  little 
to  use  knock-proof  gasoline.  In  recognition  of  his  success, 
Mr.  Midgeley  was  awarded  the  Nicholas  Medal  by  the 
American  Chemical  Society. 

278  The  Turning  Wheel 

The  commercial  rewards  from  this  research  activity  have 
been  large.  In  order  to  achieve  a  wide  market  for  the  new 
fuel  in  the  shortest  possible  time,  General  Motors  Corpora- 
tion joined  with  Standard  Oil  Company  of  New  Jersey  to 
form  the  Ethyl  Gasoline  Corporation  which  was  incor- 
porated in  Delaware,  August  18,  1924,  with  $5,000,000 
Common  stock.  Of  this  only  $1,500,000  has  been  issued,  of 
which  General  Motors  took  one  half.  Its  investment  has 
since  been  more  than  repaid  by  dividends,  and  Ethyl  has 
become  a  household  word  to  indicate  anti-knock  motor  fuel 
obtainable  on  practically  every  highway.  Under  a  liberal 
licensing  policy,  the  Ethyl  compound  is  now  used  by  nearly 
all  of  the  leading  refiners.  On  the  board  of  the  Ethyl  Gaso- 
line Corporation,  General  Motors  is  represented  by 
Donaldson  Brown,  Irenee  du  Pont,  Charles  F.  Kettering, 
and  Alfred  P.  Sloan,  Jr.,  while  Mr.  Midgeley  serves  Ethyl 
as  vice-president. 

Six  years  after  Ethyl  gasoline  was  introduced,  its  effect 
upon  the  industry  was  described  as  follows  by  C.  F.  Ketter- 
ing and  Allen  Orth  in  The  New  Necessity : 

The  car  manufacturers  have  not  hesitated  to  take  advantage  of  the 
possibilities  offered  by  this  new  fuel.  They  have  raised  the  com- 
pression ratio  of  their  engines  until  now  the  average  ratio  is  a 
little  over  5  to  I  as  compared  to  the  3j^  to  I  ratio  usually  encoun- 
tered fifteen  years  ago.  Piston  speeds  have  jumped  from  1,000  feet 
per  minute  to  over  3,000.  The  ultimate  result  is  that  from  an 
engine  of  250  cubic  inches  displacement,  we  now  obtain  over  80 
horsepower  instead  of  the  30  horsepower  of  1915.  Of  course  this 
cannot  be  attributed  solely  to  the  change  in  fuels.  Engine  designers 
have  accomplished  unheard  of  things  during  this  period.  They  have 
done  the  seemingly  miraculous  with  combustion  chambers,  valves, 
and  the  design  of  the  rapidly  reciprocating  and  rotating  engine  parts. 

Both  the  Laboratories  and  the  General  Motors  Proving 
Ground  possess  exceptional  facilities  for  testing  completed 
automobiles  and  the  parts  from  which  they  are  constructed  : 

It  is  difficult  to  observe  how  the  various  parts  of  a  car  are  operating 
when  the  car  is  traveling  one  hundred  miles  an  hour  over  the 

Research  279 

road.  The  research  engineer,  confronted  with  the  problem  of 
finding  out  what  might  be  happening  under  these  and  other  driving 
conditions,  had  to  devise  other  methods. 

The  alternative  was  to  make  the  road  run  under  the  car.  The 
chassis  dynamometer  was  designed  to  accomplish  this.  The  rear 
wheels  of  the  car  rest  on  two  large  rollers,  connected  to  a  dyna- 
mometer or  power-absorbing  and  measuring  machine.  Thus,  the 
engine  and  chassis  behave  as  if  they  were  speeding  down  a  road, 
yet  the  car  stands  still ;  and  the  engineers  are  enabled  to  stand  by 
the  car,  taking  measurements  and  studying  performance  in  a  way 
that  would  be  impossible  otherwise. 

Weather  conditions  have  to  be  manufactured  to  meet  the  de- 
mands of  research,  for  a  group  of  engineers,  seeking  facts  about 
the  operation  of  an  automobile  under  varying  temperatures,  would 
find  it  both  impractical  and  inconvenient  to  be  traveling  constantly 
between  the  arctic  circle  and  the  tropics. 

So  the  equipment  in  the  Engineering  Tests  Section  of  the  Re- 
search Laboratories  includes  a  cold  room  2,000  times  as  large  as  the 
average  household  refrigerator.  The  temperature  inside  this  room 
falls  as  low  as  50  degrees  below  zero. 

The  room  is  large  enough  to  hold  two  automobiles,  and  the  en- 
gines may  be  operated  with  the  air  at  any  desired  temperature. 
With  this  equipment,  research  engineers  are  checking  the  opera- 
tion of  carburetors,  starting  equipment  and  lubrication,  as  well  as 
checking  the  action  of  materials  and  parts  under  extreme  weather 

The  engine  is  viewed  as  a  problem  in  mechanics  and 
thermodynamics,  the  object  of  research  being  to  find  the 
best  use  of  heat.  The  Laboratories  define  the  automobile 
as  a  self-contained  factory  using  gasoline  and  air  as  raw 
materials  and  producing  chiefly  water,  carbon  dioxide,  and 
carbon  monoxide,  with  power  produced  as  a  by-product. 
The  engineers  in  this  section  follow  the  course  of  cooling 
air  into  the  combustion  chamber,  into  the  exhaust  pipes, 
and  through  the  mufflers.  At  one  end  of  the  line  is  the  spark 
plug,  at  the  other  end  is  the  muffler,  between  them  lie  the 
cooling  system  and  the  engine.  Along  this  line  are  also 
the  gears,  transmitting  power  from  the  engine  to  the 
wheels;  consequently  the  Dynamics  Section  studies  clutches, 
universal  joints,  propeller  shafts,  differentials,  axles,  and 
steering  devices.  These  involve  many  varieties  of  gears. 

280  The  Turning  Wheel 

The  gear  is  a  mathematician's  paradise.  It  entails  the  study  of 
involute,  cycloidal,  epicycloidal,  and  hypocycloidal  curves.  There 
are  spur  gears,  worm  gears,  helical  gears,  and  spiral  bevel  gears, 
all  with  their  own  individual  problems  which  bring  up  all  sorts  of 
technical  questions,  such  as  the  pressure  angle,  diametral  pitch, 
circular  pitch,  line  of  action,  addendum,  and  dedendum.  Few 
mechanical  parts  seem  so  simple  when  finished,  yet  involve  so 
much  detailed  study  as  a  gear. 

Engineers  cooperate  with  those  of  the  manufacturing 
divisions  in  the  continuous  effort  to  improve  the  perform- 
ance, quietness,  smoothness,  and  durability  of  automobile 
power  plants.  This  work  is  never-ending,  as  models  are 
being  redesigned  all  the  time,  and  every  change  has  to  be 
studied  with  an  eye  to  its  effect  on  the  entire  car. 

The  crankshaft,  the  backbone  of  the  engine,  furnishes  an  interesting 
example  of  the  number  of  factors  influencing  the  design  of  various 
parts.  The  power  and  speed  of  the  engine,  the  weight  of  its  moving 
parts,  the  number  and  arrangement  of  its  cylinders,  all  play  their 
parts  in  determining  the  size  and  strength  of  the  crankshaft  and  the 
size  of  its  bearings.  Balance  and  smoothness  must  not  be  over- 
looked. To  eliminate  the  roughness  inherent  in  conventional  recip- 
rocating engines  the  crankshaft  is  usually  counterbalanced  to  offset 
the  forces  arising  from  the  up-and-down  motion  of  the  pistons  and 
part  of  the  connecting  rod. 

The  valves  and  valve  gear  bring  up  their  own  peculiar  problems. 
The  intake  valves  must  open  and  close  at  the  proper  time  to  give  a 
full  charge  of  fuel  to  the  cylinders,  and  the  exhaust  valves  must  be 
timed  properly  to  rid  the  cylinders  of  the  burned  gases.  These 
valves  must  open  and  close  several  thousand  times  a  minute,  noise- 
lessly and  without  variation,  and  at  red  heat.  The  engineers  must 
know  materials  which  can  withstand  the  heat  and  continuous 
hammering  of  the  valve  on  its  seat.  They  must  calculate  proper 
sizes,  seat  angles,  lifts,  and  timing  of  the  valves  to  allow  a  full 
charge  of  gas  to  be  taken  in,  and  to  permit  all  of  the  exhaust  gases 
to  be  expelled.  The  spring  must  be  of  correct  size  and  tension,  and 
the  camshaft  must  give  correct  timing  without  noise. 

An  enduring  element  in  this  work  has  been  the  creation 
of  machines  for  statically  and  dynamically  balancing  such 
parts  as  fly-wheels,  crankshafts,  clutches  and  propeller 

Research  281 

shafts.  Here  was  achieved  the  "harmonic  balancer. "  This 
device  balances  out  the  torsional  vibrations  in  the  crank- 
shaft, eliminating  an  annoying  source  of  noise  and  undue 
wear  as  cumulative  explosions  give  periodic  blows  to  the 

A  code  of  General  Motors  Laboratories  might  be  com- 
pressed into  fault-finding  and  fact-finding.  Its  engineers  are 
paid  to  find  fault  with  everything  about  a  car.  It  is  the 
spirit  of  research  to  be  dissatisfied  with  anything  as  long 
as  improvement  remains  possible.  Dissatisfaction  by  itself 
is  not  enough.  Knowledge  must  be  extended.  New  facts 
must  be  found,  in  order  to  help  manufacturing  divisions 
improve  their  cars.  A  Laboratory  spokesman  has  stated 
the  case  in  these  words: 

One  might  think  that  engineers  could  design  a  mechanism  perfect 
once  and  for  all  if  they  gave  it  study  enough,  but  they  can't. 
Everyone  is  changing.  Change  is  the  watchword  of  a  progressive 
people  and  new  experience  brings  new  knowledge. 

Research  is  insurance  the  General   Motors  manufacturing  di- 
visions take  out  to  help  them  keep  just  ahead  of  the  calendar. 

Sooner  or  later  and  usually  with  all  possible  dispatch,  the 
economies  developed  through  research  affect  prices,  giving 
the  consumer  more  value  for  his  dollar.  Research  is  one 
reason  why  the  automobile  dollar  has  brought  more  values 
in  automobiles  and  tires,  consistently,  through  the  past 
fifteen  years  than  the  general  merchandise  dollar.  During 
the  boom  days,  when  the  cost-of-living  dollar  was  worth 
only  68  cents  as  compared  to  the  dollar  of  1914,  the  auto- 
mobile purchasing  dollar  was  worth  $1.28.  For  many  years, 
automobiles  and  tires  were  practically  the  only  goods  which 
the  farmer  could  buy  to  advantage,  when  farm  prices  were 
compared  with  those  of  manufactured  goods.  For  this, 
quantity  production  and  consistent  research  are  jointly  re- 

Probably  no  piece  of  research  has  saved  the  consuming 
public  more  money  than  that  which  resulted  in  the  wide- 
spread use  of  Duco  and  other  quick-drying  finishes  for 
motor  cars.  The  costs  of  painting  and  varnishing  auto- 
mobiles on  the  old  system  were  high,  because  fifteen  to 

282  The  Turning  Wheel 

thirty  days  were  required  to  paint  a  car.  On  a  heavy  pro- 
duction program  in  a  large  plant,  this  meant  that  as  many 
as  fifteen  thousand  cars  might  be  in  process  of  painting  at 
one  time.  "Twenty  million  dollars  in  automobiles  sitting  in 
warehouses  waiting  for  the  paint  to  dryl"  A  month  might 
be  required  to  finish  a  high-grade  car.  Regular  varnish  finish 
which  the  automobile  industry  had  inherited  from  the  car- 
riage trade  was  a  slow  process.  A  black  enamel  finish  could 
be  completed  in  a  few  hours,  but  it  was  used  chiefly  for 
fenders,  except  on  cheap  cars  which  might  have  black- 
enameled  bodies. 

In  1921,  a  'Taint  and  Enamel"  committee  was  appointed 
to  consider  the  whole  problem  of  painting  and  finishing  cars. 

The  industry  absolutely  had  to  have  a  finish  that  would  decrease  the 
time  .  .  .  from  days  to  hours;  it  must  not  require  temperatures 
beyond  those  wood  could  stand;  it  must  be  as  inexpensive  as  the 
varnishing  process  yet  it  must  be  applicable  in  all  colors  and  last 
the  lifetime  of  the  automobile  ...  it  must  have  all  the  advantages 
of  enamel  and  varnish  without  any  of  the  disadvantages.1 

These  requirements  daunted  the  paint  and  varnish  trade. 
Their  representatives  said:  "You  can't  change  nature."  Just 
as  the  battery  people  years  before  had  declared  that  no 
battery  could  be  built  strong  enough  to  start  a  gasoline 
engine,  so  paint  manufacturers,  in  1921,  considered  as  im- 
possible whatever  was  outside  of  their  experience.  How- 
ever, in  various  factories,  cellulose  nitrate  was  being  sprayed 
on  toys.  Tests  proved  that  this  product  dried  even  too  fast 
for  motor  cars,  but  this  demonstration  neatly  bracketed  the 
research  problem.  Varnish  was  too  slow;  existing  lacquers 
too  fast.  Between  these  extremes  there  must  be  some  suit- 
able chemical  combination.  What  was  it? 

General  Motors  Laboratories  worked  out  this  particular 
problem  with  the  help  of  other  research  staffs,  notably  that 
of  the  du  Fonts.  When  the  paint  manufacturers  upheld  the 
old  methods  by  saying  they  produced  the  best  finish  in  the 
world,  he  thought,  "What  they  mean  is:  it's  the  best  finish 
they  know  anything  about." 

lettering  and  Orth :  The  New  Necessity,  pp.  87-8  ff . 

Research  283 

To  follow  Mr.  Kettering  and  his  many  associates  through 
all  the  mazes  of  their  inquiry  in  chronological  sequence 
would  be  too  long  a  story.  The  riddle  was  finally  solved 
after  this  manner.  About  a  century  ago,  a  French  chemist 
discovered  a  brilliant,  varnish-like  coating  by  dissolving 
potato  starch  in  concentrated  nitric  acid.  A  fellow  country- 
man of  his,  using  cotton  instead  of  potato  starch,  called  the 
resulting  nitro-cellulose  "Pyroxylin."  Later  a  German 
chemist  treated  cotton  with  a  mixture  of  sulphuric  and  nitric 
acid — result,  gun-cotton.  After  the  Spanish-American  War 
military  and  naval  needs  brought  forth  cellulose  nitrate  for 
smokeless  powder,  and  incidentally  revived  interest  in 
cellulose-nitrate  lacquers.  Low-viscosity  cellulose  nitrate 
today  forms  the  basis  of  automobile  finishing  lacquers. 

Another  constituent  of  automobile  lacquer  is  butyl 
alcohol.  With  efforts  to  make  synthetic  rubber  about  1910, 
a  microorganism  was  discovered  which  converted  field  corn 
into  butyl  alcohol,  acetone,  and  ethyl  alcohol  in  the  ratios 
of  6  13  : 1.  Acetone  had  commercial  use  in  the  manufacture  of 
smokeless  powder.  The  common  source  of  acetone  was  char- 
coal, but  when  the  World  War  increased  the  demand  for 
smokeless  powder  there  was  not  enough  charcoal  available 
for  the  acetone  process.  So  the  greatest  of  the  naval  powers 
fell  back  on  the  assistance  of  the  humble  microorganism 
which  devoured  corn  and  turned  it  into  the  chemicals  men- 
tioned above.  Mars'  tiny  assistant  refused  to  make  acetone 
without  producing  twice  as  much  butyl  alcohol;  the  latter 
was  a  cumbersome  by-product;  for  years  it  was  thrown  away 
as  fast  as  made.  The  demand  for  acetone,  continuing  after 
the  war,  moved  American  distilleries,  closed  by  the  Eight- 
eenth Amendment,  to  use  their  plants  in  its  manufacture. 
One  distillery,  hoping  that  some  day  a  use  would  be  found 
for  butyl  alcohol,  stored  that  liquid  in  a  large  swimming 
pool.  Eventually  they  found  that  butyl  alcohol  was  a  good 
substitute  for  amyl  alcohol,  long  used  as  raw  material  for 
making  amyl  acetate  or  "banana  oil,"  an  important  in- 
gredient of  certain  lacquers.  So  the  cycle  of  investigation 
and  experiment  was  completed  by  utilizing  a  by-product, 
then  of  almost  no  value,  and  which  could  be  made  in  any 
desired  quantity  at  low  cost. 

284  The  Turning  Wheel 

Today  practically  every  car  has  a  lacquer  finish — a  finish  that  can 
be  applied  in  less  than  eight  hours;  one  that  is  more  durable,  more 
easily  applied,  and  more  attractive  than  either  varnish  or  black 
enamel.  However,  the  use  of  this  material  has  not  been  confined  to 
the  automobile.  It  has  invaded  the  home  and  with  it  has  come 
color — furniture,  radios  and  refrigerators  are  now  lacquer-finished. 
.  .  .  this  development  is  a  reassurance  that  nature  is  still  on  the 
job  and  always  will  be,  operating  through  human  agencies  to  meet 
the  ever-increasing  and  broadening  needs  of  people,  providing  a 
new  substance  to  replace  a  disappearing  one.  There  is  no  waste  in 
nature.  What  we  regard  as  waste  is  merely  a  dormant  substance 
awaiting  the  hand  of  research  to  start  it  serving  some  practical  and 
valuable  career.2 

When  anyone  says  that  a  desired  goal  cannot  be  reached 
because  the  process  is  contrary  to  nature,  he  is  referring 
merely  to  that  small  segment  of  nature  which  he  compre- 
hends. To  explore  that  which  is  at  present  beyond  compre- 
hension is  the  whole  duty  of  science. 

Industrial  science,  as  pursued  under  commercial  auspices, 
must  concentrate  upon  problems  likely  to  have  practical  re- 
sults within  a  reasonable  time.  Economics  enters  the  scien- 
tific investigation  at  this  point.  There  must  be  a  nice  balance 
between  vision  and  practicality.  General  Motors  has  been 
fortunate  in  preserving  that  balance.  One  of  the  Kettering 
advices  which  has  been  taken  to  heart  by  the  Laboratories 
organization  is  this:  "Engineering  must  partake  as  much 
of  economic  horse-sense  as  it  does  of  scientific  principle." 

The  truth  of  this  is  revealed  in  the  vast  number  of  patents 
which  never  reach  the  market.  Like  all  manufacturers,  Gen- 
eral Motors  welcomes  engineering  ideas  which  come  to  it 
from  outside,  but,  after  these  have  been  thoroughly  tested 
from  all  angles,  the  verdict  is  apt  to  be  disappointing  to 
the  inventors.  Statistics  show  that  out  of  35,000  inventions 
submitted  to  a  certain  manufacturer,  only  one  out  of  5,000 
had  merit.  The  inventors  of  the  others  apparently  had 
wasted  their  time  and  money.  Obviously,  industry  cannot 
wait  for  such  random  aid.  If  the  tests  through  which  out- 
side inventions  must  pass  are  considered  to  be  too  severe,  it 
must  be  remembered  that  millions  are  at  stake  in  every 

2Kettering  and  Orth:  The  New  Necessity,  pp.  92-3  ff. 

Research  285 

change  introduced  into  a  manufacturing  program  based  on 
quantity  production. 

Practical  considerations  are  also  behind  the  work  toward 
standardization  in  which  the  Laboratories  join  through 
their  association  in  the  Society  of  Automotive  Engineers.  In 
the  early  days  of  the  industry,  all  automobile  parts  were 
made  by  hand  or  on  simple  machines.  The  result  was  such 
variety  that  repairs  were  unduly  expensive.  Even  the  manu- 
facturers had  difficulty  in  securing  standardized  parts.  Ac- 
cording to  J.  K.  Barnes,  800  different  kinds  of  lock  washers 
were  made  to  fit  three  or  four  bolts  of  varying  sizes.  Auto- 
mobile makers  used  1,600  sizes  of  steel  tubing;  one  manu- 
facturer alone  using  80  sizes.  Standardization  has  now 
brought  lock  washers  down  to  16  sizes  and  steel  tubing 
to  17  sizes  in  13  thicknesses.  Two  hundred  and  thirty  alloy 
steels  have  been  reduced  to  50  varieties.  More  than  200 
parts  and  materials  used  in  automobile  manufacture  have 
been  standardized  since  1910. 

On  the  subject  of  standardization,  Mr.  Kettering  has  this 
to  say  as  to  the  benefits  automobile  owners  have  received 
as  a  result: 

That  word  "interchangeable"  is  the  sum  and  substance  of  all  stand- 
ardization. It  is  the  key  to  mass  production.  Fabrication  has 
become  a  matter  of  timed  operations  rather  than  of  individual 
ingenuity  in  getting  mismatched  pieces  together.  There  are  specified 
tolerances  that  are  rigidly  adhered  to.  Pieces  are  no  longer  antag- 
onistic. They  are  interchangeable — they  fit.  And  the  owner  now- 
adays, when  a  plug  fails  him,  goes  to  an  accessory  shop  or  maybe 
to  a  corner  filling  station,  and  asks  for  a  spark  plug.  In  about  the 
time  it  takes  to  replenish  the  water  in  the  radiator,  it  has  been 
installed  and  he  is  on  his  way  again.  The  owner  and  the  manufac- 
turer both  profit  by  this  new  form  of  simplicity.  It  has  been 
estimated  that  the  annual  saving  to  the  automobile  industry  alone 
amounts  to  three  quarters  of  a  billion  dollars.8 

There  are  constants  in  the  automobile  business,  plenty 
of  them;  but,  paradoxically,  the  greatest  constant  of  all  is 
change.  He  who  stands  still  is  lost.  The  public  must  be 
wooed  through  change  as  well  as  through  quality;  science 

3Kettering  and  Orth:  The  New  Necessity,  p.  100. 

286  The  Turning  Wheel 

and  art  provide  the  material  for  beneficial  change  in  such 
abundance  that  the  timing  of  change  becomes  an  all- 
important  factor;  hence  the  question  which  management 
faces  is  not  so  much,  "Shall  we  change?"  but  rather,  "How 
and  when  shall  we  change?"  Mr.  Kettering  calls  his  re- 
search workers  "economic-change  men."  They  provide  the 
management  with  changes  from  which  it  can  choose  those 
for  which  it  considers  the  public  is  ready. 

Not  all  beneficial  changes  can  be  introduced  drastically 
as  soon  as  they  have  been  developed.  While  the  public  in- 
sists on  change,  it  prefers  evolution  to  revolution.  Millions 
can  be  lost  by  being  too  far  ahead  of  the  times,  just  as  they 
can  be  lost  by  being  too  far  behind  the  times.  The  average 
man  likes  to  move  forward  by  short  steps  on  firm  ground 
rather  than  by  long  leaps  into  what  he  considers  the  dark. 
Scientists  may  be  quite  aware  that  the  fancied  darkness  is 
really  broad  daylight,  but  there  is  nothing  gained  by  argu- 
ing against  a  public  prejudice  in  expensive  advertising  space. 
In  a  year  or  two,  the  public  may  have  caught  up,  and  then 
may  accept  gladly  what  would  have  been  rejected  before. 
The  findings  of  the  economic-change  men  of  General 
Motors  must  consequently  be  winnowed  through  the  sieve 
of  public  acceptances. 

In  acting  as  a  general  staff  for  the  engineers  of  all  the 
Corporation's  manufacturing  divisions,  the  Research  Labo- 
ratories are  not  confined  to  the  automobile  field.  As  the 
Corporation  grows  in  the  diversity  of  its  products,  the  Re- 
search Laboratories  also  tend  to  become  more  diversified. 
Various  of  its  members  have  done  effective  work  in  re- 
frigerants; others  are  likely  to  give  keen  attention  to  the 
future  of  aero-dynamics.  General  Motors  has  recently  be- 
come a  large  factor  in  aviation,  and  the  Research  Labora- 
tories henceforth  may  consider  aviation  as  well  as  auto- 
motive problems. 

Back  of  the  whole  research  program  is  the  progressive 
philosophy  that  one  change  leads  inevitably  to  another,  that 
new  goods  produce  new  wants,  and  that  through  innova- 
tions in  the  conveniences  of  life  both  man  and  society  reach 
higher  levels  of  comfort  and  efficiency.  The  director  of  the 

Research  287 

Research  Laboratories  has  quoted  approvingly  this  state- 
ment of  Thomas  A.  Edison,  and  the  Laboratories  staff 
will  do  its  part  to  raise  what  Mr.  Edison  calls  the  "think- 
ing capacity  of  society,"  by  applying  its  cumulative  experi- 
ence and  specialized  wisdom  to  more  and  more  fields  of 
applied  science : 

...  the  automobile  has  done  more  to  make  America  a  nation  of 
thinkers  than  any  other  invention  or  agency.  The  great  value  of 
the  automobile  is  not  the  fact  that  it  has  made  it  easier  and  quicker 
and  cheaper  to  go  to  places,  but  the  fact  that  it  has  inspired  several 
million  people  to  go.  It  has  set  their  gray  matter  to  work.  It  has 
revealed  to  them  how  petty  and  meaningless  their  lives  were 
becoming.  .  .  .  Most  of  us  view  the  automobile  principally  as  a 
great  business  and  manufacturing  achievement.  It  is — but  it  is  a 
greater  educational  achievement.  In  the  beginning  we  were  a 
pioneer  people — a  restless  people.  But  when  things  came  easier  for 
us  we  began  to  lose  our  restlessness.  The  automobile  is  helping  to 
restore  it.  And  that  is  one  of  the  most  healthful  signs  of  the  present 
generation.  Restlessness  is  discontent — and  discontent  is  the  first 
necessity  of  progress.  Show  me  a  thoroughly  satisfied  man — and  I 
will  show  you  a  failure.  The  wheels  of  progress — especially  those 
of  the  automobile — have  worked  results  which  may  be  called 
miracles.  But  their  service  has  been  to  raise  the  thinking  capacity 
of  society. 

This  statement  by  the  great  Edison  is  one  of  the  most 
penetrating  tributes  ever  paid  to  the  automobile  industry; 
and,  beyond  that,  it  is  a  stirring  declaration  of  the  spirit 
which  moves  General  Motors  Research  Laboratories — a 
reasoned  dissatisfaction  with  what  is,  a  reasoned  certainty 
that  what  it  does  will  improve  the  lot  of  mankind. 

Chapter   XX 




.HE  year  1908  seems  to  have  been  a  lucky  one  for  indus- 
trial beginnings,  particularly  in  Michigan  and  the  automobile 
trade.  In  that  year  General  Motors  was  born  and  also 
Fisher  Body,  destined  to  become  one  of  its  larger  subsid- 
iaries and  of  such  proportions  that,  standing  by  itself,  it 
would  be  one  of  the  nation's  most  important  industries. 

Six  Fisher  brothers,  all  craftsmen,  were  led  to  Detroit 
and  fortune  by  the  eldest  of  them,  Fred  J.,  who  came 
to  the  hub  of  the  automobile  world  from  Norwalk,  Ohio, 
in  1901,  where  their  father,  Lawrence  Fisher,  made  car- 
riages and  wagons.  The  brothers,  learning  their  trade 
under  the  father's  watchful  eye,  were  vehicle  craftsmen  of 
the  third  generation,  the  grandfather  Fisher  having  been 
skilled  in  that  art  in  Germany,  though  in  this  country  known 
as  a  merchant  in  Peru,  Ohio.  His  son,  Lawrence,  lived  to  a 
ripe  age  and,  before  his  death  in  1921,  had  the  satisfaction 
of  seeing  six  of  his  sons  rated  among  the  masters  of  their 
craft  in  America.  These  six  brothers — Fred  J.,  Charles  T., 
William  A.,  Lawrence  P.,  Edward  F.,  and  Alfred  J., — are 
today  actively  associated  in  General  Motors,  Fisher  Body, 
and  many  other  large  enterprises. 

Going  to  work  in  Detroit  for  C.  R.  Wilson  Body  Com- 
pany, then  the  largest  firm  in  the  automobile  body  business, 
Fred  J.  Fisher  rose  to  be  superintendent.  Within  four 
years  he  and  Charles  T.  Fisher,  who  had  been  associated 
with  him  at  Wilson  for  two  and  a  half  years,  formed  Fisher 


Body  by  Fisher  289 

Body  Company,  incorporating  in  Michigan  in  July,  1908, 
for  $50,000,  with  slightly  more  than  $30,000  paid  in. 

A  few  months  later  Louis  Mendelssohn  and  Aaron  Men- 
delson  became  associated  with  the  Fishers,  obtaining  a  sub- 
stantial financial  interest,  and  also  became  actually  engaged 
in  the  business,  the  former  as  treasurer  and  the  latter  as 
secretary,  remaining  in  these  positions  until  the  time  Fisher 
became  a  part  of  General  Motors  Corporation. 

The  venture  looked  hopeless  to  many.  The  country  was 
still  shaken  from  the  effects  of  the  1907  panic.  Money  was 
tight;  general  business  slow.  For  those  who  have  courage, 
however,  a  "bad"  time  is  the  best  time  to  start  a  business 
— then  a  bold  man  can  rent  real  estate  cheaply,  and  can  get 
his  pick  of  the  labor  market.  If  he  knows  his  business  bet- 
ter than  his  competitor,  he  is  safe  in  starting  at  scratch,  be- 
cause his  costs  will  be  lower  than  those  of  his  competitors. 

The  business  prospered  from  the  start,  since  these  Fisher 
brothers — the  younger  brothers  soon  joined  the  older  ones 
in  Detroit — knew  how  to  build  automobile  bodies  superla- 
tively well.  There  was  plenty  of  room  for  improvement  in 
body  building.  The  older  concerns  had  been  builders  of 
carriage  bodies,  and  they  brought  the  simple  arts  and 
machinery  suitable  for  carriage  bodies  over  into  the  auto- 
mobile business  with  as  few  changes  as  possible.  Hence, 
they  were  a  little  slow  to  realize  that  far  greater  strength 
and  resilience  were  required  for  powered  vehicles  than  for 
drawn  vehicles.  As  a  result,  early  automobile  bodies  soon 
became  loose  and  noisy  under  road  shocks.  Even  relatively 
simple  open  bodies  did  not  give  continuous  satisfaction. 

The  Fishers  kept  their  eyes  on  closed  car  possibilities 
from  the  start.  They  saw  that  motoring  would  remain  a 
summer  sport  until  drivers  and  owners  could  be  com- 
fortable in  the  winter  months.  Women  would  never  be  really 
pleased  with  the  automobile  so  long  as  their  gowns  and  hats 
were  at  the  mercy  of  wind  and  weather.  After  pressing 
these  points  on  car  manufacturers  for  two  years,  they  were 
at  last  rewarded  in  1910  by  an  order  from  Cadillac  for  150 
closed  bodies,  the  first  "big  order"  for  closed  car  bodies 
ever  placed  in  America.  Seeing  more  business  ahead  in 
this  line,  the  Fishers  organized  the  Fisher  Closed  Body 


The  Turning  Wheel 

Company  in  December,  1910,  thus  initiating  the  march  of  the 
closed  car  to  a  position  where  it  now  dominates  the  market, 
with  approximately  95  percent  of  all  American  cars  carry- 
ing closed  bodies.  In  1912  Fisher  entered  Canadian  produc- 
tion with  Fisher  Body  Company  of  Canada,  Ltd.,  at 

These  plants  turned  in  combined  profits  of  $369,321 
in    1913-14,   $57^,495    in    1914-15*   and   $i,39°>592    in 


One  of  the  Founders  of  Fisher  Body 

1915-16,  profits  based  on  increasing  quantities  and  de- 
creasing unit  costs.  Indeed,  one  of  Fisher's  greatest  difficul- 
ties was  inducing  manufacturers  to  place  reasonable  prices 
on  closed  cars,  consonant  with  the  prices  Fisher  charged  for 
their  closed  bodies.  At  this  period  the  company  contem- 
plated entering  the  automobile  business  in  order  to  break 
the  deadlock  and  bring  closed  cars  to  the  public  at  fair 
prices.  Finally  one  manufacturer  broke  away  from  the  old 
practice;  others  followed,  and  closed  cars  became  popular. 

Body  by  Fisher  291 

The  vigorous  organization,  pushing  on,  merged  its  three 
companies  into  the  Fisher  Body  Corporation,  incorporated 
in  New  York,  August  22,  1916.  Authorized  stock  was 
$6,000,000,  par  $100,  7  percent  cumulative  Preferred 
stock,  of  which  $5,000,000  is  shown  as  issued,  and  200,000 
shares  of  Common  stock,  no  par,  but  valued  at  approxi- 
mately $10  a  share  in  an  early  statement.  Starting  with 
little  more  than  $30,000,  in  1908,  Fisher  Body  had  climbed 
in  eight  years  to  the  point  of  owning  land  and  buildings 
worth  more  than  $2,000,000,  and  machinery  worth  nearly 
$1,500,000.  Its  capacity  was  370,000  bodies  a  year,  the 
largest  in  the  industry. 

In  1919,  after  three  successful  years  in  which  the  Fisher 
name  had  become  established,  the  Fishers  sold  to  General 
Motors  Corporation  a  three  fifths  interest  in  the  Fisher 
Body  Corporation,  300,000  of  the  then  outstanding 
500,000  Fisher  shares  at  $92  a  share,  for  $27,600,000,  on 
a  series  of  five-year  notes.  General  Motors  agreed  to  pur- 
chase all  its  automobile  body  requirements  from  Fisher  for 
ten  years.  The  management  remained  with  the  Fishers. 

Both  parties  reaped  substantial  advantages  from  this 
arrangement.  General  Motors  placed  its  body  business  with 
the  leading  producer.  On  the  other  hand,  Fisher  Body 
solved  a  problem  which  had  been  growing  in  proportions  as 
Fisher  increased  in  size.  With  a  $20,000,000  property  to 
conserve,  it  became  a  matter  of  prudence  for  Fisher  to  safe- 
guard its  future  by  seeking  an  assured  outlet.  There  were 
several  ways  in  which  greater  security  might  be  obtained. 
One  way  was  for  them  to  manufacture  automobiles,  a  plan  to 
which  serious  thought  was  given.  Two  other  manufacturers 
were  in  the  market  for  the  Fisher  connection  when  the  Gen- 
eral Motors  union  was  being  considered.  General  Motors 
was  accepted  partly  because  of  the  Corporation's  stability, 
partly  because  its  cars  occupied  a  wider  price  range  than 
those  of  any  competitor.  While  Fisher  was  interested  in 
quantity  production,  it  was  also  interested  in  continuing  to 
build  high-priced  bodies  for  cars  with  quality  reputation. 
General  Motors  offered  the  connection  under  which  the 
Fishers  could  best  maintain  their  leadership  which  had  been 

292  The  Turning  Wheel 

firmly  planted  in  the  public  mind  by  their  consistent  build- 
ing of  quality  bodies. 

With  this  important  transaction  completed,  Fisher  ex- 
pansion went  on  swiftly,  the  whole  automotive  world  being 
then  in  an  expansive  mood.  National  advertising  began  to 
carry  the  craftsmen's  name  to  the  public.  Fisher  Body  Ohio 
Company  was  incorporated  October  17,  1919,  in  Ohio,  to 
produce  bodies  in  a  Cleveland  plant.  The  capitalization 
was  $10,000,000  of  8  percent  cumulative  Preferred  stock, 
par  $100,  and  100,000  shares  of  Common,  no  par.  Control 
was  in  the  Fisher  Body  Corporation  but  Cleveland  capital 
was  largely  interested.  The  plant  erected  there,  with 
1,500,000  feet  of  floor  space,  was  then  the  largest  body 
plant  in  the  world,  with  capacity  for  7,000  employees.  It  is 
now  the  second  largest  of  the  Fisher  plants,  having  been 
surpassed  by  Flint  No.  i.  Fisher  Body  Corporation 
eventually  acquired  the  entire  stock  of  the  Ohio  company. 

To  insure  its  threatened  glass  supply,  Fisher  made  a 
$4,000,000  investment  in  National  Plate  Glass  Company, 
acquiring  control.  This  leading  plate  glass  producer  had 
been  incorporated  in  Maryland,  January  17,  1920,  to 
acquire  three  large  and  well  known  glass  factories :  Colum- 
bia Plate  Glass  Company  at  Blairsville,  Pennsylvania, 
organized  1901;  Federal  Plate  Glass  Company  at  Ottawa, 
Illinois,  organized  1903;  Saginaw  Plate  Glass  Company, 
Saginaw,  Michigan,  organized  1900.  These  companies  had 
a  combined  annual  capacity  of  11,000,000  square  feet  of 
plate  glass,  and  under  a  ten-year  contract  with  Fisher  Body 
dated  January  i,  1920,  they  obtained  an  assured  outlet  for 
their  product  in  the  growing  closed  car  trade.1 

General  Motors  made  a  further  investment  of  approxi- 
mately $4,500,000  in  Fisher  Body  in  the  up-swing  of  1923. 
Fisher  prospered  greatly  in  the  next  three  years,  a  period 
marked  by  the  acquisition  of  Fleetwood  Body  Corporation, 
dating  from  1919,  and  the  purchase  or  building  of  large 
properties  in  many  parts  of  the  country.  On  June  30,  1926, 
the  outstanding  minority  interest  in  Fisher  Body  Corpora- 
tion passed  to  General  Motors  Corporation  on  the  basis  of 

1Part  of  Fisher  interests  in  National  Plate  Glass  Company  have  since  been 
acquired  by  other  companies. 

Body  by  Fisher  293 

one  and  one  half  shares  of  Fisher  for  one  of  General 
Motors,  664,720  shares  of  General  Motors  Common  being 
paid.  In  the  following  year  General  Motors  completed 
acquisition  of  Fisher  Body  Ohio  Company.  Since  1926 
Fisher  Body  Corporation  has  functioned  as  a  division  of 
General  Motors,  but  remains  under  Fisher  management. 
Fred  J.,  Charles  T.,  Lawrence  P.,  and  William  A.  Fisher 
are  directors  of  General  Motors.  Mr.  E.  F.  Fisher  is  vice- 
president  in  charge  of  production  in  the  far-flung  Fisher 
manufacturing  activities,  and  Mr.  A.  J.  Fisher  is  vice- 
president  in  charge  of  engineering,  a  responsibility  em- 
bracing the  creation  and  development  of  as  many  as  seventy 
individual  body  types  and  styles  annually  for  General 
Motors  cars. 

Before  Fisher  Body  Plant  No.  i  at  Flint,  Michigan,  now 
the  largest  in  the  world,  was  taken  over  from  Durant 
Motors,  Buick  bodies  had  been  completed  in  Detroit  and 
were  hauled  to  the  Buick  plant  by  truck  and  trailer  over 
the  Dixie  Highway.  These  long,  box-like  vehicles  moving 
on  the  Dixie  were  familiar  sights  for  many  years  to 
Michigan  motorists.  Fisher's  decision  to  build  Buick  bodies 
in  Flint  started  that  city  on  another  wave  of  growth,  since 
the  plant  employed  in  normal  times  5,500  men  in  its  more 
than  2,000,000  feet  of  floor  space.  Large  as  this  plant  was 
when  Fisher  took  it  over  in  1926,  it  was  further  expanded. 
Fisher  Plant  No.  18  in  Detroit  employs  almost  as  many 
men  as  Flint  No.  i.  Were  it  not  for  new  handling  methods 
originated  to  conserve  floor  space,  labor  and  materials,  still 
larger  factories  would  be  required  for  the  huge  production. 

Fisher  Body  is  the  world's  Largest  user  of  steel  for  auto- 
mobile body  construction,  its  requirements  reaching  335,- 
000,000  pounds  a  year.  On  all  models,  from  the  lowest  in 
price  to  the  highest,  the  sturdy  body  is  encased  in  steel, 
electrically  welded  into  a  single  unit.  Strength  and  safety 
body-tests  applied  to  the  lowest  priced  Fisher-equipped  car 
have  shown  resistance  to  12,000  pounds  (six  tons)  diagonal 
pressure  without  appreciable  damage  to  any  part  of  the  car 
or  body  structure. 

Among  the  many  advances  achieved  in  these  bodies  is  the 
extensive  use  of  solid  steel  panels.  Special  steel  had  to  be 


The  Turning  Wheel 

developed  flexible  enough  and  strong  enough  to  endure 
tremendous  strain.  Years  of  patient  work  on  the  part  of 
Fisher  engineers  and  steel  mill  experts  finally  produced  a 
metal  which  could  be  drawn  large  enough  for  a  body  panel 
under  a  pressure  of  800  tons.  The  typical  Fisher  Body  of 
today  incorporates  the  strength  of  some  200  basic  parts,  on 
which  more  than  1,200  distinct  operations  are  performed 
to  make  certain  of  their  accuracy  and  quality.  All  the  body 
parts  for  a  given  model  are  as  interchangeable  as  machine 

Miniature  Napoleonic  coach,  winner  in  one  of  the  competitions  of 
the  Fisher  Body  Craftsman's  Guild 

The  Fisher  No  Draft  Ventilator  system,  applied  in  1933 
to  all  General  Motors  cars,  provides  a  solidly  built-in  ven- 
tilator pane  for  each  side  window.  The  ventilator  and  the 
window  can  be  regulated,  independently  of  one  another. 
Fresh  air  can  be  drawn  in  without  causing  drafts,  and  any 
individual  passenger  can  get  as  much  fresh  air  as  he  likes 
without  disturbing  his  companions.  Smoke  and  stale  air  are 
drawn  out  by  the  vacuum  created  by  the  motion  of  the 
car.  After  the  division  engineers  designed  the  system,  its 
subsidiary,  the  Ternstedt  Manufacturing  Company,  was 
called  upon  to  produce  it  in  tremendous  quantities,  for  the 
system  was  no  sooner  perfected  than  it  was  decided  to  use 
it  on  all  models.  Twenty-five  hundred  men  were  put  to  work, 

Body  by  Fisher  295 

days,  nights  and  Sundays,  and  in  thirty  days  had  all  the 
necessary  machines,  tools,  dies,  plating  units,  punch  presses, 
polishing  machines,  etc.,  designed  and  produced  and  were 
turning  out  2,000  sets  or  6,000  "ventipanes"  a  day. 

Another  advanced  contribution  is  safety  glass.  All  wind- 
shields and  ventipanes  are  made  of  laminated  glass  which 
under  impact  may  be  broken  without  shattering.  Polished 
plate  glass  is  used  in  all  Fisher  Bodies,  in  such  volume  that 
the  National  Plate  Glass  Company,  which  they  then  owned, 
became  one  of  the  world's  largest  glass  manufacturers. 

The  metal  fittings  which  are  used  in  Fisher  Bodies  are 
made  by  the  Ternstedt  Manufacturing  Corporation  of 
Detroit,  a  Fisher  subsidiary  which  takes  its  name  from  the 
late  Alva  K.  Ternstedt.  Ternstedt  became  nationally  known 
to  motorists  in  1920-21,  when  Fisher  introduced  the  Tern- 
stedt window  regulator,  the  first  dependable  built-in  and 
concealed  window  control  for  closed  cars.  In  developing 
Ternstedt  to  its  present  proportions,  Fisher  merged  into  it 
three  companies :  International  Metal  Stamping  Company, 
Shepard  Art  Metal  Company,  and  England  Manufactur- 
ing Company.  In  the  Ternstedt  organization,  Fisher 
gathered,  for  the  first  time  in  the  history  of  the  industry, 
a  complete  staff  of  appointment  engineers,  designers,  artists, 
and  modelers,  prepared  to  fill  the  modern  demand  for 
artistic  harmony  of  design  in  body  hardware,  interior 
fittings,  and  similar  appointments. 

One  of  the  important  elements  to  which  the  Fishers  have 
always  devoted  unsparing  attention  in  the  building  of 
bodies  is  the  quality  of  quiet.  When  they  began  to  build 
bodies,  closed  cars  were  the  rich  man's  toy,  ridiculed  as 
"show  cases,"  and  seldom  driven  outside  of  cities.  Even 
open  bodies  rattled  and  creaked.  The  central  problem  of 
body-building  all  along  has  been  to  increase  strength  and 
quietness  without  increasing  weight.  Progress  to  the  present 
degree  of  excellence  has  called  forth  the  best  efforts  of  a 
large  staff  of  engineers. 

Finally,  there  is  the  decisive  quality  of  style.  Its  pursuit 
begins  of  course  with  initial  designs.  After  these  have  been 
discussed  with  the  car  manufacturer  and  a  choice  made,  a 
one  quarter  size  clay  model  of  the  car  is  built  in  the  Art  and 

296  The  Turning  Wheel 

Color  section  by  skilled  sculptors.  This  model  is  also  care- 
fully considered  and  changed  until  it  suits  the  fastidious 
tastes  of  all  concerned.  Then  another  model  is  made,  and  if 
found  satisfactory,  a  full-sized  wood  and  clay  model  is  con- 
structed in  the  exact  dimensions  of  the  complete  car,  the  clay 
being  rubbed  down  to  the  smoothness  required  for  a  perfect 
finish.  This  is  then  finished  inside  and  out  according  to 
color  schemes  worked  out  by  the  Color  section.  In  the  lac- 
quered body,  the  upholstered  interior  with  its  hardware 
trimmings,  one  sees  an  exact  reproduction  of  the  car  as  it 
will  appear  on  the  sales  floor.  Months  pass  in  these  elabo- 
rate preparations  for  manufacturing  the  automobile  as  a 
style  vehicle. 

Color  has  dominated  automobile  styling  since  about  1925, 
when  the  Duco  finishes  made  it  possible  to  meet  a  public 
demand  for  color  which  had  already  been  roused  by  manu- 
facturers in  other  lines.  In  his  book,  .  .  .  and  then  came 
Ford,  Charles  Merz  says  of  this  period, 

.  .  .  The  invention  of  pyroxylin  finishes  had  changed  the  raiment 
of  the  fashionable  car  from  dark  blue  or  black  to  hues  as  delicate 
as  the  pale  tint  of  an  Easter  egg  or  as  ruddy  as  a  sunset.  "The  tend- 
ency toward  a  more  varied  color-scheme  was  apparent  in  1925," 
the  New  York  Times  observed,  "but  with  the  beginning  of  1926 
the  trend  toward  color  was  seen  to  be  a  stampede." 

The  color  obsession  led  to  bizarre  effects  in  motordom 
for  a  while;  later  tendencies  are  more  restrained  and  re- 
fined. More  than  800  colors  were  taken  on  by  the  industry 
after  1923,  and  as  a  result  one  of  the  chief  tasks  has  been 
to  simplify  color  schemes.  This  has  been  done  through 
analysis  of  the  spectrum,  breaking  up  the  rainbow  into  its 
nine  steps;  white,  black,  red,  yellow,  orange,  green,  blue, 
indigo,  and  violet,  each  hue  with  its  accompanying  tints  and 
shades.  By  this  means  "off  colors"  are  sorted  out  and  thou- 
sands of  possibilities  reduced  to  450.  Of  these  150  are  un- 
suited  for  automobile  use.  The  remaining  300  are  possibili- 
ties. By  the  use  of  Maxwell's  color  wheel,  to  which  colored 
discs  are  adjusted  with  certain  areas  exposed,  it  is  deter- 
mined just  what  proportion  of  the  various  primary  colors  is 

Body  by  Fisher  297 

required  to  produce  a  desired  blend.  By  this  means  blended 
colors  are  fixed  so  accurately  that  each  can  be  reproduced 
faithfully  on  each  new  shipment  of  cars.  All  these  refine- 
ments come  to  market  in  General  Motors  cars  with  Fisher 

From  antiquity  down  to  the  present,  style  and  decora- 
tion have  been  influential  in  vehicle  design.  Excavations  in 
the  strata  of  buried  civilizations  bring  forth  evidence  that 
the  chief's  chariot  was  as  elaborately  ornamented  as  his 
shield  and  helmet.  All  through  the  coach-and-four  period,  a 
man's  carriages  indicated  his  rank  and  fortune.  The  coaches 
of  royalty  and  aristocracy  received  the  attention  of  noted 
artists  as  well  as  of  skilled  craftsmen.  In  recognition  of 
their  beauty,  Fisher  adopted  as  its  emblem  a  silhouette 
derived  from  the  designs  of  two  coaches  used  by  Napoleon 
Bonaparte,  one  at  his  coronation  and  the  other  at  his  mar- 
riage to  Marie  Louise.  These  are  among  the  finest  examples 
of  coach  work  of  the  pre-automobile  days  and  the  emblem 
drawn  from  them  is  one  of  the  most  significant  symbols  of 
quality  in  modern  workmanship.  It  represents  the  artistry 
of  an  unhurried  age  which  Fisher,  in  spite  of  its  mechanical 
prowess,  holds  as  a  standard  before  its  staff  and  extends  as 
a  pledge  of  quality  to  the  users  of  Fisher  Bodies  on  General 
Motors  cars. 

The  growth  of  Fisher  Body  has  been  phenomenal.  In 
fifteen  years  after  its  founding,  the  muster  roll  of  Fisher 
employees  had  grown  from  300  to  40,000.  Fisher  built 
105,000  bodies  in  1914,  and  more  than  five  times  that  num- 
ber in  1924.  In  its  twenty-five  years  of  existence,  Fisher 
has  produced  more  than  9,000,000  automobile  bodies  im- 
pressive as  emphasizing  the  recognition  of  Fisher  crafts- 


No  review  of  the  growth  and  character  of  the  Fisher 
Body  Corporation  would  be  complete  without  attention  to 
the  Fisher  Body  Craftsman's  Guild. 

The  purpose  of  the  Guild  is  to  foster  the  ideals  of  true 
craftsmanship  among  boys  of  high  school  and  college  age 


The  Turning  Wheel 


















C     CO 


3    J-4 
co    <U 

hH*      C 

c  ^ 


<!  « 



vo    -* 



rf-  CO    ON 

T^1  <S     VO 

v£f  of  O  ' 

\Q  d    w~> 

J5      5 



*-  S 




p  -  - 

Z    G 

o"  2 

c  ^   t        jg 


Jj    o 



pq  pq       pq  pq 

ON   m 

HH        <N 

ON    ON 

Jo          .-I 

o§    °~ 


6  & 
o   o 



O    o 


O  'r; 


4-.     •   •-•   n 

"c     '   o   6 


§  a 


c3   T3 
»-i     O 



L*        ^w     ^-^     h— ^        r-1        ° 

e    ^  .c  .S  r3 

S  «  **  *e  *i  c«  j 

.as  .x  >  .a 

c«    ^  3  *jr  • 

*>  *— '  T"  O  -r 

5      -^ 

§     a«:^  §^^ 




o  -o 

>-i       t*1       O       *•*       •""       *-•       >>    [~r  I 



w      sj      >*->    j>      x< 


C  uJL 


Body  by  Fisher 




SoM     - 
















o1      S1 

10        10 







vO         vO 

^     1 

D           £ 




1-1          ro 

2     £? 


?          J? 




ON          ON 





^                                            ^ 


•^                                                   h. 









i.       -      -      4 









3                                               ^ 










)                                                                                                                                                                                                 J- 

H                                                         0. 

5                            &- 

S   '- 

1    • 







»-(»-(               i-Q         •    i  —  j 

-—  < 


>»           >, 



•T3       •      ' 

.   J3   -O             cS       '   *G 
i.2     S          ^G       .     fc 

5feJ  |al 

ill     ill 

5  |Kc3  |^  §S 

3<       <    <; 











i      § 

o.        a 
1         S 

d     u 

>>  rt    >, 

"T3    4->  ^3 
0     C     0 

fe<  ^ 






Tnstedt  Manufactu] 

ng  Company  — 




VH        CJC 

13   ^H 
C7*  ^^ 
0    '^ 


>-,    ;  2 






•*3  c^ 

s  1 




300  The  Turning  Wheel 

in  the  United  States  and  Canada.  In  form  and  spirit  it  is  a 
revival  of  the  picturesque  workers'  guilds  of  the  Middle 
Ages.  Its  membership  today  numbers  750,000  boys,  in  all 
parts  of  the  United  States  and  Canada,  and  in  the  three 
years  since  it  was  organized  (1930),  the  Guild  has  earned 
international  recognition. 

Fourteen  leading  personalities  in  academic  and  practical 
engineering  training  serve  on  its  honorary  board  of  judges. 
An  advisory  board,  made  up  of  the  heads  of  secondary 
public  school  systems  and  of  leaders  in  manual  arts  teach- 
ing, gives  the  Guild  the  benefit  of  its  members'  experience 
in  dealing  with  boys  from  twelve  to  twenty  years  of  age. 

In  more  than  2,000  high  schools,  in  nearly  600  major 
cities  of  the  United  States,  the  Guild  is  now  an  accepted 
and  approved  educational  activity  for  boys.  The  Y.M.C.A. 
endorses  and  encourages  it.  The  only  recognition  which  the 
National  Headquarters,  Boy  Scouts  of  America,  has  ever 
extended  to  another  activity  among  boys  is  given  to  the 
Guild.  Daniel  Carter  Beard,  National  Commissioner,  Boy 
Scouts  of  America,  is  honorary  president  of  the  Guild. 

The  President  of  the  United  States,  presidents,  premiers, 
ministers  of  public  instruction,  such  personalities  as  Gen- 
eral Baden-Powell,  founder  of  the  world  Boy  Scout 
movement,  the  Governors  of  all  the  states  in  the  Union,  and 
the  Lieutenant-Governors  of  all  the  provinces  of  Canada, 
commend  the  ideals  and  purposes  of  this  institution. 

The  Guild  for  the  last  three  years  has  provided  an  an- 
nual competition  in  craftsmanship,  in  which  any  boy  in  the 
United  States  or  Canada  over  twelve  years  old  and  not 
more  than  nineteen  may  enter.  The  principal  awards  for 
excellence  in  this  competition  have  been  a  series  of  four- 
year  university  scholarships  valued  at  $5,000  each.  This 
year's  competition  (1933—34)  provides  twenty-four  uni- 
versity scholarships,  ranging  from  $500  to  $5,000  and  with 
a  total  value  of  $51,000. 

The  subject  of  competition  is  the  reproduction  of  a  mini- 
ature model  of  the  Napoleonic  coach.  This  tests  skill,  per- 
severance, and  patience.  It  also  offers  the  widest  opportunity 
for  skill  in  metal-craft,  wood-craft,  paint-craft  and  trim- 

Body  by  Fisher 


The  Guild  today  has  ten  of  its  alumni,  winners  of  first 
awards,  in  American  and  Canadian  universities.  Five  others 
are  fitting  themselves  to  enter  universities.  In  addition,  the 
Guild  has  distributed  3,220  other  substantial  awards  for 
excellence  in  craftsmanship. 

The  president  of  the  Guild  for  the  United  States  is 
Mr.  William  A.  Fisher,  president  of  Fisher  Body  Corpora- 
tion; for  the  Dominion  of  Canada,  Mr.  R.  S.  McLaughlin 
is  president. 



1268 -ACRE  OUT -DOOR 

at^Cilford,  near  Detroit,  JWich. 


Bonn)  floiiiflB^niuBQniflMuiuDBtQHJB.uLitp  B,< 


Z~  J&ing 

3-  Office  and, 


-  (ote  House 

6-  Qirectorb 


Chapter   XXI 


RIGIDAIRE  entered  the  General  Motors  family  as  a  result 
of  one  of  W.  C.  Durant's  lightning  intuitions.  The  Murray 
Body  Company,  long  established  in  Detroit  as  automobile 
body  builders,  organized  the  Guardian  Frigerator  Company 
in  1916  as  a  pioneering  project  in  the  then  almost  virgin 
field  of  electric  refrigeration.  The  head  of  the  firm  told 
Mr.  Durant  that  all  was  not  going  well  with  Guardian. 
There  seemed  to  be  a  little  family  friction,  since  the  Murray 
boys  had  none  of  their  father's  faith  in  the  enterprise.  This 
is  scarcely  to  be  wondered  at,  as  the  whole  concept  of  elec- 
tric refrigeration  in  small  units  for  household  use  was  still 
untried,  and  Guardian  had  scarcely  crept  beyond  the  stage 
of  rather  discouraging  experiments. 

Mr.  Murray  took  Mr.  Durant  to  the  fourth  floor  of  an 
old  factory  building,  where  he  found  several  refrigerators 
in  various  stages  of  manufacture,  and  a  most  inadequate 
machine  equipment — two  lathes,  a  shaper,  a  hand  milling 
machine,  drill  press,  tool  grinder,  and  hand  tools.  Three 
quart-bottles  sufficed  for  the  distillation  of  the  sulphur 
dioxide  used  as  the  refrigerant.  Only  fifty  Guardian  refrig- 
erators had  been  made  and  sold  during  the  year;  the  con- 
cern was  losing  money,  and  the  elderly  Mr.  Murray  could 
see  heavy  losses  present  and  to  come. 

It  was  Mr.  Murray's  idea  that  Mr.  Durant  should  put 
in  new  money  and  let  Guardian  continue,  but  this  did  not 
suit  Mr.  Durant's  purposes.  Negotiations  held  fire  for  some 


Frigidaire  and  Electric  Refrigeration    305 

time.  Even  before  1918,  when  he  made  a  personal  invest- 
ment in  Guardian,  Mr.  Durant  told  a  gathering  of  General 
Motors  executives  and  their  financial  friends  that  here  was 
a  babe-in-arms  destined  to  rapid  growth  and  likely  before 
many  years  to  earn  enough  to  pay  the  salaries  of  all  the 
staff  at  General  Motors  headquarters.  His  listeners  looked 
at  him  with  amazement,  yet  it  came  to  pass  within  ten  years. 

The  naming  of  Frigidaire  is  thus  described  by  Mr. 
Durant.  He  recollects  that  he  wrote  to  various  of  his 
friends  describing  the  new  article  of  merchandise  and  asked 
for  suggestions.  Lists  of  names  came  in  from  many  sources 
and  Frigidaire,  the  creation  of  an  Ohioan,  was  selected.  It 
has  since  become  a  household  word  in  all  parts  of  the  world. 

Guardian  became  the  Frigidaire  Corporation  on  the 
eighth  of  February,  1919,  taking  the  name  previously  given 
to  the  product.  On  March  2ist  following,  the  directors  of 
General  Motors  authorized  the  purchase- of  the  capital  stock 
of  Frigidaire  for  $56,366.50,  which  represented  the  amount 
Mr.  Durant  had  invested  in  it,  his  intention  from  the  first 
having  been  to  link  it  with  the  Corporation  as  soon  as  it 
showed  promise.  Manufacturing  continued  in  Detroit  un- 
til 1920,  when  the  business  was  turned  over  to  the  Delco- 
Light  Company  of  Dayton,  Ohio,  created  out  of  Domestic 
Engineering  Company. 

The  rapid  growth  of  Frigidaire  dates  from  this  change 
of  base  and  management.  Delco-Light,  making  individual 
electric  light  plants  for  homes  and  farms,  had  already 
mastered  the  difficult  art  of  specialty  selling.  In  the  rede- 
signing of  Frigidaire,  Delco-Light  was  fortunate  in  having 
available  the  services  of  C.  F.  Kettering,  now  General 
Motors'  vice-president  in  charge  of  research,  and  also  vice- 
president  of  Frigidaire  Corporation.  Already  Mr.  Ketter- 
ing had  developed  Delco  equipment  for  automobile 
lighting,  starting,  and  ignition.  For  years  he  had  been 
keenly  interested  in  electric  refrigeration  for  rural  homes, 
as  an  adjunct  of  Delco-Light  plants.  Ever  since  Frigidaire's 
move  to  Dayton  he  has  taken  a  leading  part  in  its  engineer- 
ing councils. 

Selling  at  a  relatively  high  price — $750  and  up — in  a 
skeptical  market,  Frigidaire  had  to  be  pushed  with 

306  The  Turning  Wheel 

determination  until  costs  could  be  brought  down  by  quantity 
production.  The  early  years  developed  these  figures  in 
units  sold : 

1921 365 

1922 2,000 

1923 4,700 

1924 20,000 

These  jumps  in  production  reveal  the  influence  of  mass 
production  methods,  lower  prices,  improved  sales  methods, 
and  the  development  of  overseas  markets.  Frigidaire  had 
to  carry  the  novel  message  of  electric  refrigeration  directly 
to  the  consumer,  breaking  down  the  household  habits  of 
centuries.  As  the  product  improved,  the  market  became 
more  receptive,  and  sharp  price  cuts  kept  public  favor  from 
lagging.  Sales  mounted  with  dizzy  speed.  Meantime  the  fac- 
tories at  Dayton,  operated  on  triple  shifts,  were  being  con- 
stantly enlarged  and  improved  by  the  installation  of  special 
mass-production  machines  and  systems.  Today  Frigidaire 
occupies  fifty-three  acres  of  factory  space. 

By  1926  Frigidaire  had  so  far  outstripped  Delco-Light 
in  sales  that  a  separation  was  advisable.  The  present  Frigi- 
daire Corporation  was  formed,  and  in  1930  Delco-Light 
was  transferred  to  the  North  East  plant  at  Rochester, 
New  York,  and  rechristened  Delco  Appliance  Corporation. 

In  1926  Frigidaire  abandoned  the  wooden  cabinet  in 
favor  of  sheet  metal  built  on  a  wooden  frame.  Porcelain 
was  applied  first  to  the  inside  of  the  refrigerator,  but  its 
superiority  over  paint  for  inside  finish  soon  brought  porce- 
lain to  the  exterior  of  the  new  metal  cabinet  Frigidaires. 
In  the  present  factory  layout  is  located  the  largest  porcelain- 
enameling  plant  in  the  world. 

Export  sales  multiplied  amazingly,  taking  one  seventh  of 
total  production,  and  employing  an  overseas  staff  of  2,000 
persons.  Every  civilized  country  in  the  world  had  its  staff 
of  Frigidaire  salesmen,  and  many  lands  which  would  hardly 
be  considered  civilized  in  the  ordinary  sense  of  the  word 
have  seen  Frigidaires  installed  at  the  instance  of  aggressive 
representatives.  The  export  trade  is  still  predominantly 

Frigidaire  and  Electric  Refrigeration    307 

commercial,  while  in  the  United  States  the  bulk  of  installa- 
tions is  for  household  use. 

Household  refrigeration  was  the  first  concern  of  Frigi- 
daire, but  in  1923,  at  the  request  of  ice  cream  manufac- 
turers, the  company  undertook  to  supply  them  with  special 
cabinets  for  their  retail  outlets.  Since  that  time,  partly  as 
a  result  of  its  ever-improving  compressors,  Frigidaire  has 
entered  appropriate  machines  in  many  other  fields  of  retail 
business — groceries,  meat  markets,  restaurants,  dairies,  and 
florists'  shops. 

Electric  water  coolers  for  office  buildings  and  factories 
were  added  in  1926.  Frigidaire  builds  six  types  of  individual 
water  coolers  and  three  tank  types,  and  cooling  equipment 
for  draught  and  bottled  beer  and  other  beverages.  The  en- 
tire Frigidaire  line  consists  of  155  different  models  in  19 
various  lines.  Among  these  are  12  models  of  household 
refrigerators,  de-humidifiers  and  several  types  of  air  con- 
ditioners for  domestic  and  commercial  uses  as  well  as  com- 
plete air  conditioning  equipment  for  railway  cars. 

The  last  two  lines  represent  Frigidaire's  entry,  in  1932, 
into  the  new  and  growing  business  of  air-conditioning,  a 
logical  move  in  view  of  the  Corporation's  long  experience 
with  electric  refrigeration  and  its  advance  from  small 
wooden  refrigerators  for  household  use  to  the  cooling  of 
large  rooms  for  fur  storage,  and  other  extensive  installa- 
tions. Frigidaire  engineers  have  already  installed  air- 
conditioning  equipment  in  hundreds  of  homes,  offices,  and 
stores,  sometimes  under  difficult  conditions  due  to  the  fact 
that  the  buildings  were  not  properly  designed  for  the  pur- 
pose. Their  experience  indicates  that  air-conditioning  offers 
possibilities  fully  equal  to  those  already  realized  in  electric 

Frigidaire  air-conditioning  equipment  was  selected  to 
provide  the  requisite  conditions  and  controls  for  the 
comprehensive  allergic  tests  conducted  at  Johns  Hopkins 
University,  Baltimore,  Maryland,  by  Dr.  Leslie  N.  Gay,  to 
determine  whether  high  altitude  conditions  favorable  to 
hay  fever  and  asthma  victims  could  be  reproduced  in  homes 
and  offices  for  the  relief  of  sufferers. 

308  The  Turning  Wheel 

In  summarizing  his  results,  Dr.  Gay  reported: 

The  experiments  in  the  treatment  of  pollen  hay  fever  and  asthma 
with  air-conditioned  atmosphere  represent  a  new  method  of  attack. 
Complete  relief  was  given  to  patients  suffering  with  symptoms  of 
hay  fever,  whether  they  occupied  the  room  for  several  hours  or  for 
longer  periods  of  time.  Striking  relief  was  given  to  patients  suffer- 
ing with  pollen  asthma  within  twelve  hours  after  admission  to  the 
room.  For  individuals  who  can  make  provision  for  such  atmosphere, 
whether  in  their  homes  or  offices,  great  relief  can  be  offered. 

A  new  refrigerant  at  a  lower  cost,  Freon,  odorless,  non- 
corrosive,  non-inflammable  and  non-toxic  under  ordinary 
conditions,  lately  developed  in  the  research  department  of 
Frigidaire,  is  expected  to  be  a  factor  in  all  the  branches  of 
temperature  control. 

At  the  peak  of  production  Frigidaire  employs  more  than 
11,000  persons  in  its  Greater  Dayton  plants,  uses  thirty- 
five  carloads  of  steel  a  day,  consumes  more  silver  solder 
than  any  other  manufacturer  in  the  world,  and  is  one  of  the 
world's  largest  copper  consumers.  Eighteen  porcelain  fur- 
naces operate  continuously,  300,000  pieces  being  given 
three  burns  each  and  consuming  400  tons  of  porcelain  frit 
each  month.  Four  production  lines  creep  through  the 
Moraine  City  plant,  and  there  are  two  conveyors,  each  a 
mile  and  a  quarter  in  length,  carrying  materials  to  the 
thousands  of  workmen  stationed  along  the  assembly  lines. 
The  impressive  technique  of  material  movement  worked  out 
in  the  automobile  industry  had  been  applied  fully  by 
Frigidaire  in  its  building  of  electric  refrigerators.  Refrig- 
erators are  given  tests  for  temperature,  in  which  ther- 
mometer readings  are  taken  inside  the  food  compartment 
while  the  cabinet  stands  in  a  room  at  90  degrees,  a  running 
test  of  three  hours,  and  a  noise  test  in  a  room  arranged  to 
amplify  sound  hundreds  of  times. 

The  public  has  purchased  more  than  half  a  billion  dollars' 
worth  of  Frigidaires.  The  2,5OO,oooth  Frigidaire  left  the 
factory  at  Dayton  on  July  8,  1932,  for  a  cruise  around  the 
world  and  was  displayed  by  a  Frigidaire  dealer  in  every 
port  of  call. 

Within  fourteen  years,  the  period  of  General  Motors' 
association  with  Frigidaire,  electric  refrigeration  has  come 

Frigidaire  and  Electric  Refrigeration    309 

to  be  standard  equipment.  The  evolution  has  been  from 
wood  to  porcelain,  from  complexity  to  simplicity  of  opera- 
tion and  repair,  from  small  units  to  large,  until  in  modern 
air-conditioning  one  finds  entire  buildings  under  tempera- 
ture control.  Costs  have  steadily  been  reduced,  dropping 
from  a  minimum  price  of  $750  in  1921  to  $96  in  1933  for 
a  much  superior  but  smaller  refrigerator.  This  represents  a 
turnover  for  quantity  production  and  intelligent  sales  effort 
unsurpassed  in  any  field  of  American  enterprise. 

Frigidaire  is  General  Motors'  largest  producer  in  the 
non-automobile  field.  Mr.  E.  G.  Biechler  has  been  president 
and  general  manager  since  1926  when  the  present  Frigi- 
daire Corporation  was  incorporated. 


Chapter   XXII 


ENTION  has  been  made  of  the  steam  "drags"  built  in 
England  and  France  from  1821  on,  some  of  which  were 
used  alternately  in  towing  both  goods  and  passengers  in 
trailers.  In  America,  the  first  power  road  vehicle  especially 
designed  for  goods  transport  was  a  huge  steam  traction 
engine  begun  in  New  York  City  in  1858,  shipped  West,  and 
assembled  there  to  haul  goods  from  the  Missouri  River 
to  Colorado.  It  broke  down  on  its  first  trip  seven  miles  after 
starting,  the  spot  being  marked  by  a  monument  at  Nebraska 
City,  Nebraska. 

Better  luck  attended  the  self-propelled  "steamers"  built 
for  fire-fighting  purposes  by  the  Amoskeag  Mills  at  Man- 
chester, New  Hampshire,  one  of  which  was  bought  by  the 
City  of  Boston  after  it  had  been  rushed  there  to  help  fight 
the  great  fire  of  1872.  Hartford,  Connecticut,  bought  a 
steam  fire  fighter,  the  Jumbo,  in  1876.  Many  other  less  suc- 
cessful attempts  to  develop  self-propelled  fire-fighters  are 
on  record,  one  having  been  built  by  the  famous  Captain 
Ericsson  as  early  as  1840. 

Gasoline  delivery  wagons  began  to  appear  shortly  after 
the  light  gasoline  cars  proved  their  superiority  over  steam 
and  electric  vehicles  in  the  Chicago  race  of  1895.  The 
Langert  Company  of  Philadelphia  entered  one  in  the  Cos- 
mopolitan race  of  1896.  An  interesting  early  variant  was 
a  sightseeing  stage  built  by  C.  S.  Fairchild  of  Portland, 
Oregon;  this  carried  eighteen  passengers  and  was  powered 
by  a  kerosene  engine. 


Commercial  Vehicles  311 

Among  the  pioneers  in  commercial  vehicles  were : 

Charles  E.  Woods  of  the  Woods  Motor  Vehicle  Com- 
pany of  Chicago,  builder  of  light  electric  delivery 

Hiram  P.  Maxim,  then  connected  with  the  Pope  Com- 
pany at  Hartford,  Connecticut. 

Early  motor  fire  engine,  then  largest  in  the  world,  owned  by  Hart- 
ford, Connecticut.  From  Cosmopolitan  Magazine,  1896 

L.  F.  N.  Baldwin,  who  converted  a  Boston  horse  van  into 
a  steam  wagon  with  a  6  horsepower  engine  and  a  side 

Alexander  Winton,  whose  Winton  delivery  wagon  was 
the  first  gasoline  commercial  vehicle  produced  for  sale 
in  any  quantity,  eight  being  under  construction  in 
October,  1898. 

Charles  E.  Duryea,  also  in  1898,  with  a  three-wheel  gaso- 
line delivery  wagon,  weight  1,000  pounds. 

A.  L.  Riker,  who  built  for  B.  Altman  &  Co.,  New  York 
City,  in  1898,  electric  delivery  wagons  which  were 
the  first  to  be  operated  regularly  by  a  large  metro- 
politan store. 

312  The  Turning  Wheel 

Electric  vehicles,  with  the  Pope  and  Whitney  millions 
behind  them,  had  the  better  of  their  gasoline  and  steam 
competitors  in  the  late  'nineties,  not  only  in  the  matter  of 
city  goods  deliveries,  but  also  in  cabs  for  hire.  Electric  cab 
service  began  in  New  York  City  in  1 897,  and  soon  after  was 
extended  to  other  cities  under  the  same  financial  auspices. 
Electricity  held  the  advantage  for  some  years  against  the 
challenge  of  steam  and  gasoline;  but  its  prestige  was 
weakened  in  1900  when  Altman's,  after  three  years*  trial  of 
electrics,  switched  to  gasoline  delivery  wagons.  However, 
only  three  gasoline  cars  were  exhibited  in  Madison  Square 
Garden  at  the  1900  show,  the  first  exclusive  automobile 
show  held  in  America.  In  that  year  Detroit  Automobile 
Company,  predecessor  of  Cadillac,  introduced  a  most 
advanced  gasoline  delivery  wagon,  unusual  for  its 
aluminum,  gun  metal,  and  nickel  axles.  No  market  seems 
to  have  been  found  for  it,  however.  The  year  1900  saw  also 
the  founding  of  the  Autocar  Company  of  Philadelphia  and, 
in  Detroit,  the  first  step  in  the  evolution  of  General  Motors 


In  1900  Max  Grabowsky  built  and  sold  to  the  American 
Garment  Cleaning  Company  a  commercial  vehicle,  pow- 
ered by  a  single-cylinder  horizontal  engine.  In  1902  he 
organized  the  Rapid  Motor  Vehicle  Company  which  put 
out  200  units  in  its  first  year.  Moving  to  Pontiac  in 
1904,  Rapid  erected  there  the  first  building  in  America 
for  the  exclusive  manufacture  of  self-propelled  commercial 
vehicles.  In  1908  General  Motors  acquired  a  majority  of 
Rapid  Motor  Vehicle  stock.  Shortly  afterward  Reliance 
Motor  Truck  Company  of  Owosso,  organized  in  1905,  also 
came  into  General  Motors,  and  a  sales  company  was  organ- 
ized to  handle  the  output  of  both  truck  companies  under  the 
name  of  General  Motors  Truck  Company.  This  company 
took  over  manufacturing  operations  in  1912,  and  moved 
Reliance  to  Pontiac  in  1913. 

Between  1900  and  1910  the  gasoline  commercial  car 
developed  a  decided  supremacy  for  all-round  use,  but  the 
electric  delivery  wagon  had  made  a  place  for  itself  in  cities 

Commercial  Vehicles  313 

and  for  light  merchandise.  The  rout  of  the  steam  cars, 
however,  was  complete.  The  light  steam  delivery  wagon 
disappeared  from  the  market  by  1905,  the  heavy  steam 
truck  by  1910.  Except  for  a  few  pioneers,  like  Rapid,  which 
staked  everything  on  truck  specialization,  most  of  the  trucks 
produced  from  1900  to  1910  were  adaptations  of  com- 
mercial bodies  to  stock  passenger  car  chassis.  In  the  next 
five  years  of  fast  and  furious  evolution  the  commercial 
vehicle  manufacturers  had  settled  down  more  or  less  to  a 
standard  type  "distinguished  by  a  pressed  or  rolled  steel 
frame,  four-cylinder  vertical  engine  mounted  in  front, 
water-cooled,  with  magneto  ignition,  three-speed  selective 
gear  transmission,  shaft  and  worm-gear  drive  to  rear-axle 
differential,  seat  back  of  hood  and  dash,  left-side  drive  with 
wheel-steering  and  center-control  levers." 

Having  led  in  establishing  some  of  these  fundamental 
principles  of  design  in  gasoline  commercial  vehicles,  Gen- 
eral Motors  Truck  in  1912  recognized  the  usefulness  of 
electric  delivery  wagons  for  city  use  by  building  a  full  line 
of  electric  delivery  wagons,  which  it  continued  until  1916. 
By  that  time  refinements  in  the  construction  of  light  gaso- 
line cars  had  reached  a*  point  at  which  the  electric  delivery 
wagon  business  might  be  expected  to  show  diminishing  re- 
turns. The  small,  light  delivery  wagon,  adapted  to  a 
passenger  car  chassis,  had  shown  its  possibilities  early.  Both 
Cadillac  and  Oldsmobile  had  offered  such  delivery  wagons 
in  1904,  the  latter  carrying  off  first  prize  in  its  class  against 
stiff  competition  in  the  Automobile  Club  of  America  tests. 
These  two  manufacturers  soon  after  went  into  the  produc- 
tion of  larger  cars,  the  light  delivery  wagon  business  going 
elsewhere.  But  in  1917,  after  General  Motors  and  Chev- 
rolet came  together,  Chevrolet  began  the  manufacture  of 
commercial  units,  a  decision  which  may  have  had  a  bearing 
upon  the  abandonment  of  electric  delivery  wagon  manu- 
facture by  General  Motors  Truck. 


The  light-weight  commercial  car  production  of  Chev- 
rolet, which  has  since  grown  to  tremendous  figures,  began 


The  Turning  Wheel 

modestly  with  the  manufacture  of  437  chassis  and  40  light 
delivery  wagons.  The  commercial  chassis,  one-half  ton  with 
open  body,  was  priced  at  $595  f.o.b.  Flint.  A  one-ton  truck, 
known  at  the  Model  T,  and  powered  with  the  FA  four- 
cylinder  motor,  was  introduced  in  1918  at  from  $1,125  to 
$1,320.  Prices  on  comparable  units  rose  with  the  advancing 


Pioneer  police  patrol  wagon,  Chicago.  From  Scribner's  Magazine, 
February,  1913 

price  levels  until  the  latter  part  of  1920  and  then  began  to 
drop  with  increasing  quantity  production.  In  1933  the  half- 
ton  chassis,  much  more  powerful  than  the  original  of  1917, 
and  powered  with  a  six-cylinder  motor  instead  of  a  four, 
sold  for  $330,  and  the  larger  truck,  capacity  increased  to 
one  and  one  half  tons,  sold  for  $480.  During  the  interven- 
ing period  production  of  Chevrolet  commercial  units  rose 
steadily  year  by  year  to  a  peak  of  344,963  in  1929,  when 
commercial  cars  represented  more  than  25  percent  of  total 
Chevrolet  unit  production.  Through  the  entire  Chevrolet 
truck  experience,  its  commercial  units  have  been  roughly  17 
percent  of  total  production,  more  than  1,500,000  units  hav- 
ing been  manufactured  since  1917. 

In  1927  Chevrolet  undertook  on  a  small  scale  to  build 
part  of  its  commercial  bodies,  especially  closed  cabs;  and  in 
1929  added  a  high-grade  body  known  as  the  Sedan  Delivery. 
In  1930  it  introduced  single  and  dual  wheels  as  standard 

Commercial  Vehicles  315 

equipment  on  the  heavy  duty  truck,  and  brought  out  a  one 
and  one  half  ton  truck  with  1 57-inch  wheelbase. 

Owing  to  the  large  production  necessary,  securing  proper 
bodies  for  installation  of  Chevrolet  commercial  bodies  had 
become  a  major  problem,  leading  to  the  acquisition  in  1930 
of  the  Martin-Parry  Corporation  plants  in  Indianapolis, 
then  one  of  the  largest  commercial  car  body  builders  in  the 
world.  The  formation  of  the  Chevrolet  Commercial  Body 
division  followed,  with  emphasis  upon  advanced  design, 
volume  production,  improved  material,  sales  control,  and 
GMAC  financing.  Since  this  acquisition  Chevrolet's  partici- 
pation in  the  total  commercial  car  market  has  steadily  in- 
creased from  32.7  percent  of  the  1930  business  available  in 
the  weight  class  in  which  it  sells  trucks  to  approximately 
50  percent  of  the  business  available  in  1933.  The  latter 
figure  means  that  Chevrolet  sold  approximately  as  many 
cars  in  this  class  as  all  its  competitors  combined.  In  the 
account  of  the  General  Motors  Fleet  Sales  Corporation  in 
Chapter  xxvi,  reference  is  made  to  Chevrolet's  sales  to  fleet 
owners  and  to  the  government,  in  both  of  which  classifica- 
tions it  leads  all  competitors  by  overwhelming  margins. 


Yellow  Truck  &  Coach  Manufacturing  Company,  a 
Maine  corporation,  succeeded  the  Yellow  Cab  Manufac- 
turing Company,  which  was  incorporated  in  the  year  1910. 

Yellow  Cab  grew  out  of  the  Walden  W.  Shaw  Auto 
Livery  Company,  operating  taxicabs  at  loth  and  Wabash 
streets,  Chicago.  Mr.  Shaw  was  president,  and  Mr.  John  D. 
Hertz,  vice-president  and  general  manager.  Mr.  Hertz 
described  their  condition,  after  a  disastrous  strike,  as  bank- 
rupt, $97,000  in  debt  and  with  nothing  but  forty  battered 
cars  as  assets.  The  Shaw  Company  and  another  taxicab 
company,  the  City  Motor  Cab  Company,  were  merged  into 
a  Maine  corporation  on  August  25,  1910. 

After  a  year's  work,  the  first  specially  designed  taxicab 
was  completed  on  Christmas  morning,  1914,  and  it  was 
manufactured  in  1915.  With  its  service  record  of  600,000 
miles  appended,  this  famous  cab  was  shown  at  the  Century 
of  Progress  Exposition  in  Chicago  in  1933. 

316  The  Turning  Wheel 

Forty  cabs  of  this  model  were  built  during  the  first  seven 
months  of  1915,  and  placed  in  service  on  Chicago  streets 
on  August  2,  1915.  In  1916  a  small  factory  at  310  East 
Huron  Street,  Chicago,  with  eighty  workers,  was  turning 
out  one  car  a  day.  Sole  ownership  of  the  company  was 
acquired  by  the  Walden  W.  Shaw  Corporation,  a  New 
York  organization,  in  1916.  Three  years  later  the  Auto 
Livery  Company  ceased  operating  taxicabs,  confining  its 
activities  entirely  to  manufacturing  commercial  vehicles. 
Taxicab  operation  was  continued  by  the  Walden  W.  Shaw 
Corporation  which  in  1919  became  Chicago  Yellow  Cab 
Company,  Incorporated. 

In  evolving  a  sturdy  taxicab,  a  nation-wide  demand  there 
had  been  uncovered.  Orders  for  cabs  began  to  come  in  from 
other  cities,  and  production  rose  to  twenty-five  cars  a  day. 
In  1920  the  Yellow  Cab  Manufacturing  Company  was 
formed  to  succeed  the  Shaw  Livery  Company,  and  a  further 
separation  of  the  Yellow  and  Shaw  interests  followed  in 
1921.  The  branching-out  process  which  we  have  seen  so 
often  in  automotive  history  began,  resulting  in  the  forma- 
tion of  Yellow  Motor  Coach  Company  in  November,  1922, 
and  Yellow  Sleeve  Valve  Engine  Works  at  East  Moline, 
Illinois,  within  the  following  month.  Yellow  Manufacturing 
Acceptance  Corporation  was  formed  in  December,  1923,  to 
finance  sales. 

A  merger  of  the  General  Motors  Truck  properties  and 
the  Yellow  interests  was  effected  in  September,  1925,  when 
Yellow  Truck  &  Coach  Manufacturing  Company,  formerly 
Yellow  Cab  Manufacturing  Company,  acquired  all  the  stock 
of  both  General  Motors  Truck  Corporation  and  General 
Motors  Truck  Company  from  General  Motors  Corporation 
in  exchange  for  a  controlling  interest,  now  above  50  per- 
cent, in  the  Yellow  Truck  &  Coach  Manufacturing  Com- 

The  Yellow  Truck  &  Coach  Manufacturing  Company, 
through  its  subsidiaries,  builds  and  sells  trucks,  motor 
coaches,  and  taxicabs  of  a  wide  variety,  thoroughly  adapted 
to  the  complex  needs  of  the  commercial  world.  The  merger 
brought  together  General  Motors  Truck,  which  had 
been  active  in  its  field  for  seventeen  years,  and  the  leading 

Commercial  Vehicles 


manufacturer  of  motor  coaches  and  taxicabs.  This  company 
continues  to  be  one  of  the  largest  builders  of  commercial 
vehicles,  with  practically  all  of  the  leading  coach  operators 
in  the  United  States  using  its  equipment.  A  special  type  of 
omnibus  developed  for  the  purpose  was  selected  to  provide 
transportation  within  the  grounds  of  the  Worlds  Fair  of 
1933.  The  company's  products  include  a  complete  line  of 
trucks  from  one  and  one  half  tons  to  fifteen  tons,  as  well  as 

Manufacture  of  these  vehicles  is  centralized  at  Pontiac, 
Michigan.  The  General  Motors  Truck  plant  in  Pontiac 
which  was  completed  late  in  1927  is  the  largest  plant  in  the 
world  devoted  exclusively  to  the  manufacture  of  commer- 
cial vehicles. 

Mr.  P.  W.  Seiler  has  served  as  president  of  Yellow 
Truck  &  Coach  Manufacturing  Company  since  1927. 

Chapter   XXIII 


ENERAL  MOTORS  made  its  first  effective  contact  with 
aviation  during  the  World  War,  when  its  plants  delivered 
more  than  2,500  Liberty  engines  for  airplanes.1  More  than 
10,000  Libertys  were  on  order  from  the  government  when 
the  war  ended.  This  experience,  and  the  Corporation's 
habit  of  looking  ahead,  naturally  led  it  to  consider  the 
future  possibilities  of  aviation  as  a  peace-time  industry. 

An  enviable  record  in  war-time  production  of  air- 
planes had  been  established  by  the  Dayton-Wright  Airplane 
Company  of  Dayton,  Ohio,  a  1917  offshoot  of  the  Dayton 
Metal  Products  Company,  one  of  the  several  Dayton  com- 
panies already  referred  to  as  being  established  in  rapid  suc- 
cession in  the  Ohio  city  by  Messrs.  Kettering  and  Deeds 
and  their  associates.  As  the  home  of  the  famous  Wright 
brothers,  first  to  fly  a  heavier-than-air  machine,  Dayton 
had  excellent  reason  for  a  keen  interest  in  aviation.  When 
the  war  demand  for  planes  developed,  the  industrial  leaders 
of  the  city  promptly  organized  to  take  the  lead  in  produc- 
tion. Neither  before  nor  since  have  airplanes  been  manu- 
factured at  the  speed  and  in  the  quantity  at  which  Dayton- 
Wright  produced  them  for  the  United  States  Government 
during  October,  1918,  when  an  average  of  forty  completed 
planes  a  day  were  turned  out.  In  all,  Dayton-Wright  pro- 
duced more  than  3,000  of  the  famous  DeHaviland  (DH) 
fours,  and  300  Standard  JI  training  planes. 

*As  shown  in  Chapter  XII:  "The  War  Years." 

General  Motors  in  Aviation          319 

During  this  period  the  liaison  between  the  United  States 
Army  Air  Service  and  Dayton-Wright  Airplane  Company 
was  very  close.  One  of  the  latter's  Hying  fields  was  taken 
over  by  the  Air  Service,  renamed  McCook  Field,  and  as 
such  became  famous  in  American  aviation  history. 

Airplane  production  fell  rapidly  through  1919,  but  the 
long  view  held  that  eventually  aviation  would  take  its  place 
as  a  major  industry.  General  Motors  purchased  substantial 
interests  in  several  Dayton  companies,  and  acquired  on 
September  25,  1919,  all  the  outstanding  shares  of  Dayton 
Metal  Products  Company,  and  Dayton-Wright  Airplane 
Company.  The  latter  was  re-incorporated  as  the  Dayton- 
Wright  Company  on  December,  24,  1919,  until  recently  a 
wholly-owned  subsidiary  of  General  Aviation  Corporation. 
Various  of  its  properties  were  turned  over  to  other  uses  as 
the  other  Dayton  interests  of  General  Motors  developed, 
notably  Frigidaire,  and  Inland  Manufacturing.  Until  the 
move  to  Detroit  in  1925  General  Motors  Laboratories 
occupied  one  of  the  former  Dayton-Wright  buildings.  The 
Dayton-Wright  Realty  Company,  wholly  owned  by  Gen- 
eral Aviation  Corporation,  was  formed  in  1933  to  hold 
title  to  the  largest  tract  of  land  used  as  a  flying  field  during 
the  war. 

General  Motors'  interest  in  aviation  revived  and  a  con- 
nection was  made  with  Anthony  H.  G.  Fokker.  The  Ameri- 
can market  for  Fokker  planes  having  been  developed 
through  importations,  American  manufacture  was  begun 
through  the  Atlantic  Aircraft  Corporation  of  Hasbrouck 
Heights,  New  Jersey,  in  1926.  Atlantic  Aircraft  Corpora- 
tion, incorporated  December  14,  1923,  retained  its  separate 
status  as  a  corporation  and,  until  recently,  was  a  wholly- 
owned  subsidiary  of  General  Aviation  Corporation. 

A  second  manufacturing  plant  was  established  at  Glen- 
dale,  West  Virginia,  Fokker  Aircraft  Corporation  being 
incorporated  December  3,  1927,  as  a  holding  company  cov- 
ering both  operations.  From  1926  to  1930,  211  commercial 
airplanes  of  nine  models  were  manufactured,  the  most 
popular  being  the  Super  Universal  of  which  eighty  were 
delivered  from  January  to  October,  1929.  There  were 


The  Turning  Wheel 

delivered  also  forty-five  service  airplanes,  all  trimotor,  to 
the  Army  and  Marine  Corps.  With  these,  army  pilots  hung 
up  many  notable  records  among  them : 

1.  San  Francisco — Honolulu,  non-stop  flight  in  a  United 

States  Army  c-n  trimotor  piloted  by  Lieutenants 
Maitland  and  Hegenberger. 

2.  A  one-stop  flight  by  Major  Bourne  in  the  Marine 

Corps  TA-I   trimotor  from  Washington  to  Man- 
agua, Nicaragua. 

3.  In    an   Army   C-II-A   trimotor,    Major    Carl    Spatz 

established  the  first  endurance  refueling  record  by 
remaining  in  the  air  over  150  hours. 

GA-43  climbing.   This  low-wing,  all  metal  monoplane  is  made  by 
General  Aviation  Manufacturing  Corporation  at  Dundalk,  Maryland 


Shortly  after  the  formation  of  Fokker  Aircraft  Corpora- 
tion, General  Motors  acquired  400,000  shares  of  the 
Fokker  Common  stock.  In  payment,  General  Motors  turned 
over  all  of  the  capital  stock  of  Dayton-Wright  Company. 
The  assets  of  the  latter  company  consisted  of  McCook 
Field  located  in  Dayton,  Ohio,  a  large  number  of  aviation 
patents,  and  additional  cash  assets  of  substantially  $6,500,- 
ooo.  On  May  24,  1930,  the  name  of  the  Corporation  was 
changed  to  General  Aviation  Corporation,  and  operations 

General  Motors  in  Aviation         321 

were  consolidated  in  a  plant  at  Dundalk,  Maryland,  leased 
from  the  Curtiss-Caproni  Corporation.  On  August  29, 
1931,  the  manufacturing  operation  was  incorporated  as 
General  Aviation  Manufacturing  Corporation,  wholly 
owned  by  General  Aviation  Corporation,  which  also  owned 
Atlantic  Aircraft,  the  Metalair  Corporation,  and  the  Day- 
ton-Wright Company. 

General  Aviation  Corporation  was  a  holding  company 
organized  under  the  laws  of  Delaware,  with  authorized 
capital,  as  of  June  21,  1930,  of  5,000,000  shares  of  no  par 
Common  stock  and  $1,000,000  in  $25  Preferred  shares.  In 
July,  1932,  capitalization  was  reduced  to  1,000,000  shares 
of  stock  without  par  value.  In  April,  1933,  the  capital  stock 
was  changed  to  $i  par  value  per  share.  General  Motors 
owns  approximately  50  per  cent  of  the  980,900  shares  of 
Common  stock  issued  by  General  Aviation,  the  balance  be- 
ing widely  held  over  the  country. 


In  April,  1933,  General  Aviation  Corporation  sold  its 
manufacturing  interests  and  certain  other  assets  to  North 
American  Aviation,  Inc.,  in  return  for  approximately  43  per- 
cent of  the  Common  stock  of  the  latter  which,  through 
various  stock  holdings,  reaches  down  to  transport  and 
manufacturing  companies  in  various  parts  of  the  country.  In 
the  merger  between  General  Aviation  and  North  American 
Aviation,  ownership  of  General  Aviation  Manufacturing 
Corporation,  Atlantic,  Metalair,  and  Dayton-Wright  (ex- 
cept as  to  real  estate  already  noted)  passed  to  North 
American  Aviation.  As  the  latter  already  owned  the  B/J 
Aircraft  Corporation,  another  property  located  at  Dundalk, 
Maryland,  near  Baltimore,  this  company  has  been  merged 
with  General  Aviation  Manufacturing  Corporation.  North 
American  Aviation  owns  completely  Eastern  Air  Transport 
and  has  substantial  interests  in  two  other  transport  com- 
panies— Transcontinental  &  Western  Air,  Inc.,  and  Western 
Air  Express — as  well  as  in  Douglas  Aircraft,  Inc.,  a  manu- 
facturing company.  Atlantic  Aircraft  has  since  been  dis- 

322  The  Turning  Wheel 

Through  the  merger  of  April,  1933,  General  Motors 
extended  its  aviation  interests,  until  it  is  now  one  of  the 
leading  factors  in  both  manufacturing  and  transport,  since 
North  American  Aviation,  Inc.,  is  one  of  the  three  largest 
aviation  groups  in  the  United  States. 

North  American  Aviation  was  incorporated  December  6, 
1928,  as  an  investment  trust  specializing  in  aviation 
securities.  Its  authorized  capital  stock  was  6,000,000  shares 
of  which  2,000,000  shares  were  offered  for  sale.  On 
March  9,  1932,  the  stock  was  changed  from  no  par  to 
$5  par  value.  Later,  North  American  Aviation  became 
a  holding  company.  Its  shares  were  changed  to  $i  each 
in  1933.  In  order  to  insure  control,  General  Motors  Cor- 
poration bought  an  additional  interest  in  North  Ameri- 
can Aviation,  making  the  total  amount  of  North  American 
Aviation  stock  owned  by  General  Motors  and  General 
Aviation  Corporation  in  excess  of  5 1  percent. 


In  the  transportation  field,  Eastern  Air  Transport,  Inc., 
formerly  Pitcairn  Aviation,  Inc.,  which  was  formed  in 
1927,  is  a  wholly-owned  subsidiary  of  North  American 
Aviation.  Eastern  Air  operates  mail  and  passenger  lines 
between  New  York  and  Southern  cities.  On  the  fifteenth 
anniversary  of  the  first  regular  air  mail  contract,  estab- 
lished May  15,  1918,  between  Washington,  D.  C.,  and 
New  York,  the  New  York  Times  cited  Eastern  Air  Trans- 
port's present  competence  as  an  example  of  progress  in  the 
period.  The  first  air  mail  made  75  miles  an  hour  for  200 
miles  once  a  day,  while  over  the  same  route  Eastern  Air 
Transport  now  operates  18  passenger  planes  every  hour 
on-the-hour  over  this  first  route  and  then  proceeds  for 
2,268  airway  miles  more  on  regular  schedule. 

In  Transcontinental  Air  Transport,  Inc.,  North  Ameri- 
can Aviation  also  owns  a  substantial  interest.  T.A.T.,  in- 
corporated in  Delaware,  May  14,  1928,  operated  the  first 
combined  air  and  rail  service  from  New  York  City  to  Los 
Angeles  and  San  Francisco  in  conjunction  with  the  Pennsyl- 
vania Railroad.  It  ceased  operations  in  October,  1930,  con- 
tinuing in  existence  as  a  holding  company,  owning  47.6 

General  Motors  in  Aviation          323 

percent  of  Transcontinental  and  Western  Air,  Inc.  T.A.T. 
has  a  small  holding  in  Western  Air  Express  Corporation. 

In  Western  Air  Express  Corporation,  North  American 
Aviation,  Inc.,  owns  a  controlling  interest.  Organized  in 
1926,  Western  Air  Express  operates  mail,  passenger, 
and  express  service  from  San  Diego  to  Los  Angeles  to  Salt 
Lake  City,  and  from  Cheyenne  to  El  Paso  and  to  Amarillo, 
Texas,  via  Denver  and  Pueblo,  Colorado.  Western  Air 
Express  Corporation  also  owns  a  47.6  percent  interest  in 
Transcontinental  and  Western  Air,  Inc. 

Transcontinental  and  Western  Air,  Inc.,  was  formed  in 
October,  1930,  to  take  over  as  one  transcontinental  air 
route  the  lines  formerly  operated  by  Western  Air  and 
Transcontinental  Air  Transport,  forming  the  shortest 

GA-43:  front  view 

coast-to-coast  air  route.  T.  &  W.  A.  is  the  operating  com- 
pany with  which  Colonel  Charles  A.  Lindbergh  is  identified 
as  chairman  of  the  Technical  Committee.  Colonel  Lind- 
bergh laid  out  in  1928  for  T.A.T.  the  line  now  operated 
by  Transcontinental  and  Western  Air  from  New  York  to 
Los  Angeles. 

Over  the  three  transportation  systems  brought  together 
under  North  American  Aviation  control,  43,576  miles  are 
flown  daily  on  regular  schedules. 

Eastern  Air  Transport,  Inc.,  flies  13,500  scheduled  miles 
daily  over  the  2,493-mile  airway,  serving  twenty-eight 
cities.  This  company  operates  ten  round  trips  daily  between 
New  York  and  Washington,  five  of  them  fast  non-stop  ex- 
press schedules  and  all  flown  by  air  liners  carrying  fifteen 
to  eighteen  passengers.  Planes  of  Eastern  Air  Transport, 
Inc.,  and  its  subsidiaries  have  covered  18,000,000  miles. 

324  The  Turning  Wheel 

Transcontinental  &  Western  Air,  Inc.,  familiarly  known 
as  "TWA,"  operates  23,298  miles  daily  over  a  4,401- 
mile  airway  from  New  York  to  Los  Angeles  and  San  Fran- 
cisco via  St.  Louis,  Kansas  City  and  Albuquerque  and  via 
Springfield,  Missouri,  Tulsa  and  Oklahoma  City,  serving 
twenty-three  cities  on  this  Mid-Transcontinental  airway. 
Its  planes  have  flown  a  total  of  more  than  20,000,000  miles. 
A  fast  New  York-Chicago  service  is  maintained. 

Western  Air  Express,  Inc.,  is  one  of  the  oldest  air  trans- 
port lines  in  the  United  States.  It  flies  5,016  miles  daily 
from  Cheyenne  to  El  Paso  via  Albuquerque,  to  Amarillo 
via  Pueblo,  and  from  Salt  Lake  City  to  Los  Angeles  and 
San  Diego,  a  total  of  1,762  airway  miles.  Twelve  cities  are 
served,  and  the  company's  planes  have  flown  millions  of 
miles  on  schedule. 

These  three  systems  have  flown  more  than  40,000,000 
miles,  carrying  more  than  475,000  passengers  and  more 
than  10,000,000  pounds  of  mail. 


The  wholly-owned  manufacturing  plants  of  North 
American  Aviation  are  located  within  easy  reach  of  each 
other  at  Dundalk,  Maryland,  a  suburb  of  Baltimore,  where 
commercial  transport  planes,  as  well  as  military  and  naval 
planes,  are  manufactured.  The  plants  are  modern  and  close 
to  flying  fields,  and  front  directly  on  the  new  municipal 
airport  now  being  developed,  which  makes  the  plants  avail- 
able to  both  land  and  water  craft. 


One  series  in  which  General  Aviation  Manufacturing 
Corporation  takes  especial  pride  is  the  GA-FLB  type  Flying 
Lifeboat  of  the  Coast  Guard.  Five  of  these  staunch  seaplanes 
are  on  duty  on  the  Atlantic  Coast,  bearing  the  names  of 
stars — Antares,  Altair,  Acrux,  Acamar,  and  Arcturus.  After 
experiments  with  various  amphibians,  the  Coast  Guard 
decided  that  life-saving  on  the  high  seas  made  imperative 
the  creation  of  a  seaplane  to  fill  the  following  requirements : 

General  Motors  in  Aviation          325 

An  aerial  "eye"  capable  of  extended  search,  radio-equipped  to  main- 
tain constant  contact  with  surface,  thus  saving  hours  and  possibly 
days  of  delay  of  search ;  an  aerial  ambulance  capable  of  a  speed  of 
100  miles  per  hour,  able  to  land  in  rough  sea,  equipped  with 
hatches  large  enough  to  admit  of  stretcher  cases  and  to  be  able  to 
take  off  in  rough  water ;  a  demolition  outfit  to  effect  the  destruction 
at  sea  of  derelicts  and  obstructions  to  navigation  within  a  few 
hours  after  the  report  of  location;  a  high  speed  flying  patrol  for 
observation,  landing  and  returning  with  rescued  crews  of  distressed 
small  craft  and  capable  of  taking  aboard  fifteen  or  more  passengers 
from  distressed  craft  and  standing  by  for  lengthy  periods  on  the 
surface,  maintaining  in  the  meantime  radio  communication  with 
surface  craft  until  transfer  can  be  made  of  its  passengers. 

GA-43:  side  view 

In  the  United  States  Naval  Institute  Proceedings  for 
January,  1933,  Colonel  Harold  C.  Reisinger  of  the  United 
States  Marine  Corps  says : 

These  specifications  were  turned  over  to  the  General  Aviation  Cor- 
poration of  Baltimore,  Maryland,  and  the  flying  lifeboat  was 
constructed  there.  The  finished  product  has  by  test  and  in  actual 
service  lived  up  to  the  fondest  hopes  of  its  most  ardent  advocates. 

Captain  Reisinger  gives  several  stirring  accounts  of 
rescues  effected  by  these  ships  near  Cape  May,  which  would 
have  been  impossible  without  them.  Perhaps  the  most 
thrilling  of  the  many  rescues  by  the  flying  lifeboats  was 
that  of  Paul  Long,  saved  by  the  Arcturus  of  the  Miami 
Station  in  a  sea  so  high  that  its  left  wing  was  unavoidably 
damaged.  Thereafter  the  Arcturus  taxied  thirty  miles  to 
shore  through  waves  eight  to  fifteen  feet  high.  The  whole 
record  of  the  two  flying  lifeboats  on  the  Miami  Station  is 
one  to  arouse  admiration  and  establish  the  utility  of  this 
craft  in  its  special  field.  In  fifty-three  days  the  two  ships  at 

326  The  Turning  Wheel 

Miami  received  twenty-seven  calls,  and  answered  all  of 
them  successfully. 

At  the  former  B/J  plant  General  Aviation  Manufactur- 
ing Corporation  is  also  producing  military  and  naval  air- 
planes. This  plant  is  equipped  with  a  wind  tunnel  with  the 
aid  of  which  the  aerodynamic  forces  on  a  model  can  be  ac- 
curately measured  through  a  system  of  electrically  driven 
balance  arms.  From  these  data,  predictions  on  the  per- 
formance and  flying  characteristics  of  the  actual  airplane 
can  be  made. 

Following  the  decline  in  demand  for  commercial  planes, 
B/J  concentrated  successfully  on  fighting  craft  and  supplies 
for  the  national  services.  In  May  and  June,  1929,  orders 
were  received  for  three  experimental  planes — a  single- 
seater  Navy  Fighter,  a  two-place  Navy  Observation  plane, 
and  a  two-seater  pursuit  ship  for  the  Army  Air  Corps. 

Following  the  building  of  experimental  models,  B/J  re- 
ceived production  orders  for  twenty-five  army  pursuit 
planes  known  as  Yp-i6,  and  twenty-seven  Navy  observa- 
tion types  called  oj-2  land  and  seaplanes,  the  former  go- 
ing to  the  army  air  base  at  Selfridge  Field,  Michigan,  and 
the  latter  to  the  naval  air  station  at  San  Diego,  where  they 
are  being  used  on  cruisers  of  the  Pacific  fleet. 

In  process  of  development  in  1933  were  a  new  two-place 
combined  fighter,  and  long-distance  scouting  plane  desig- 
nated as  XF-2-J,  all  metal  except  for  covering  on  the  wing 
and  control  surfaces;  also  an  experimental  single-seater 
fighter  known  as  XF-3-J,  embodying  the  latest  features  in 
aerodynamics  and  structural  design,  and  powered  with  the 
newest  military  engine. 

In  addition  to  its  construction  work  the  company  con- 
ducts research  in  aerodynamics,  design  and  structures,  its 
wind-tunnel  services  being  in  demand  by  other  manu- 
facturers lacking  that  equipment. 


North  American  Aviation,  Inc.,  also  has  a  substantial 
interest  in  Douglas  Aircraft  Company,  incorporated  in 
Delaware,  November  30,  1928,  to  take  over  the  assets  of 

General  Motors  in  Aviation          327 

the  Davis-Douglas  Company  (the  Douglas  Company  from 
1921),  a  partnership  active  in  Western  aviation  since  1920. 
Douglas  has  developed  an  extensive  European  business, 
building  planes  specially  designed  for  foreign  use.  It  manu- 
factures commercial  and  military  aircraft  at  Santa  Monica, 
California,  being  one  of  the  nation's  leaders  in  military 
aircraft,  and  owns  5 1  percent  of  the  Common  stock  of  the 
Northrop  Corporation  organized  in  1932. 

Before  General  Aviation  bought  into  North  American 
Aviation,  Inc.,  the  latter  had  become  the  second  in  point  of 
transport  by  1932,  and  also  held  a  good  position  as  a  pro- 
ducer of  planes.  Hence,  with  43  percent  of  North  American 

Flying  Lifeboat  of  the  Arcturus  Class — GA-FLB 

Aviation  stock  in  its  treasury,  General  Aviation  becomes 
one  of  the  largest  factors  in  both  the  manufacturing  and 
operating  branches  of  aviation.  Through  its  controlling 
interest  in  General  Aviation,  the  General  Motors  Corpora- 
tion is  in  position  to  cooperate  fully  in  the  anticipated 
progress  of  aviation,  and  expects  to  assist  that  development 
by  placing  its  research  facilities  and  manufacturing  experi- 
ence at  the  disposal  of  its  aviation  affiliates.  For  these 
reasons  the  recent  enlargement  of  General  Motors  activity 
in  aviation  has  been  hailed  approvingly  by  the  press.  It 
seems  to  be  generally  recognized  that  aviation  has  reached 
a  stage  at  which  scientific  and  business  assistance  on  a  large 
scale  will  mean  accelerated  progress. 

328  The  Turning  Wheel 

The  New  York  Herald  Tribune  for  April  27,  1933,  thus 
sums  up  the  Corporation's  present  standing  in  aviation: 

The  broadening  of  this  phase  of  General  Motors  activities,  it  is 
believed,  will  bring  to  the  public  and  to  the  aviation  industry,  both 
from  a  manufacturing  and  a  transport  operating  standpoint,  the 
organization,  technical  efficiency  and  experience  which  General 
Motors  has  thus  far  given  in  main  part  to  the  automotive  industry. 
It  is  hoped  that  through  the  acquisition,  control  and  coordination 
of  these  individual  units  in  the  aviation  field  General  Motors 
Corporation  will  play  a  part  in  that  field  comparable  to  its  devel- 
opment in  the  motor  industry. 

Mr.  Ernest  R.  Breech  is  president  of  North  American 
Aviation,  Inc. 

Chapter   XXIV 




,HE  most  complete  statement  of  the  point  of  view  of 
General  Motors  in  its  broad  relations  with  stockholders, 
employees,  dealers,  suppliers,  and  the  public  is  contained  in 
the  speech  which  President  Alfred  P.  Sloan,  Jr.,  delivered 
to  representatives  of  the  automotive  press  at  the  Proving 
Ground  on  September  28,  1927,  and  previously  referred  to 
in  this  volume.  The  occasion  was  a  three-day  visit  to  the 
Proving  Ground  by  the  automobile  editors  of  American 
newspapers,  and  this  important  gathering  occurred  at  one 
of  the  most  interesting  junctures  in  the  history  of  the  auto- 
mobile industry. 

It  was  a  time  of  rising  trade  and  yet  of  considerable  un- 
certainty, since  no  one  could  quite  foresee  the  boiling  busi- 
ness thermometer  of  the  next  two  years,  and  there  were 
plain  indications  that  the  industry  as  a  whole  had  reached 
a  condition  of  relative  stability  as  compared  to  previous 
eras  in  which  facilities  for  manufacturing  motor  cars  had 
been  generally  too  small  to  meet  the  ever-growing  demand. 
Consequently,  there  was  need  to  review  the  past,  analyze 
the  present  in  the  light  of  lessons  learned,  and  restate  the 
principles  and  policies  under  which  the  Corporation  would 
grapple  with  the  future: 

President  Sloan's  speech  follows,  in  part:. 

"You  of  course  appreciate  that  this  industry  of  ours — 
the  automotive  industry — is  today  the  greatest  in  the  world. 


330  The  Turning  Wheel 

Three  or  four  years  ago  it  passed,  in  volume,  steel  and 
steel  products,  the  next  largest  industry.  This  means,  ex- 
pressed otherwise,  that  upon  its  prosperity  depends  the 
prosperity  of  many  millions  of  our  citizens  and  the  degree 
to  which  it  has  become  stabilized  in  turn  has  a  tremendous 
influence  on  the  stabilization  of  industry  as  a  whole,  and 
therefore  on  the  prosperity  and  happiness  of  still  many 
more  of  our  citizens.  Directly  and  indirectly,  this  industry 
distributes  hundreds  of  millions  of  dollars  annually  to  those 
who  are  connected  with  it,  in  one  way  or  another,  as 
workers.  It  also  distributes  hundreds  of  millions  of  dollars 
in  the  aggregate  to  those  who  have  invested  in  its  securi- 
ties. The  purchasing  power  of  this  total  aggregation,  as 
you  must  appreciate,  is  tremendous. 

"I  believe  that  if  you  questioned  many  of  your  readers 
as  to  the  present  position  of  the  automotive  industry,  they 
would  tell  you  that  it  is  growing  by  leaps  and  bounds.  I 
believe  further  you  would  sense  uncertainty  as  to  what  is 
going  to  happen  in  the  industry  when  the  so-called  state  of 
saturation  is  reached.  I  do  not  know  whether  you  appre- 
ciate it  or  not,  but  the  industry  has  not  grown  very  much 
during  the  past  three  or  four  years.  It  is  practically  stabi- 
lized at  the  present  time. 

"What  has  taken  place  is  a  shift  of  business  from  one 
manufacturer  to  another,  and  the  announcements  in  the 
press  as  well  as  the  general  publicity  of  those  manufacturers 
who  have  succeeded  in  increasing  their  business  give,  I 
think,  the  impression  that  this  is  true  of  the  whole  industry. 
If  we  could  assume,  for  the  sake  of  argument,  that  we  will 
reach  the  point  at  which  twenty-five  million  cars  and  trucks 
will  be  registered  in  the  United  States — an  assumption  that 
from  what  we  have  accomplished  so  far  is  certainly  per- 
fectly reasonable — then  I  think  we  could  safely  say  that 
the  replacement  demand,  plus  the  export  demand  which 
will  increase  for  many  years  yet,  plus  the  normal  growth, 
would  amount  to  something  like  four  to  four  and  one  half 
million  vehicles  a  year  and  would  require  the  manufacture 
of  a  number  of  cars  equal  to  or  greater  than  has  yet  been 
produced  in  any  year  in  the  history  of  the  industry.  .  .  . 

"I  am  sure  that  I  do  not  need  to  elaborate  what  the 

The  Point  of  View  of  General  Motors     331 

automotive  industry  consists  of,  its  influence  on  the  pros- 
perity  of  the  United  States,  the  influence  that  it  has  had  in 
many  other  industries  which  contribute  to  its  production 
necessities.  General  Motors  is  an  important  part  of  this 
great  industry  of  ours  and  as  my  contribution  to  your  visit 
with  us  I  would  like  to  tell  you  in  a  brief  way  something 
about  General  Motors ;  how  we  are  thinking,  what  we  are 
doing,  and  our  ambitions  for  the  future. 

"Let  me  deal  here  with  what  General  Motors  includes 
and  with  the  responsibility  that  rests  on  its  management. 

"First.  We  have  approximately  60,000  stockholders.1 
The  market  value  of  the  securities  that  these  stockholders 
hold  at  the  present  time  exceeds  $2,000,000,000 — a  very 
tidy  sum.  This  enormous  sum  and  the  responsibility  of  act- 
ing as  trustees  throws  a  very  great  responsibility  on  Gen- 
eral Motors'  organization.  In  1926  these  stockholders 
received,  in  dividend  disbursement,  an  amount  in  excess  of 
$100,000,000.  The  purchasing  power  of  this  $100,000,000 
has  an  important  influence  on  our  general  business  situation. 

"Second.  We  have  180,000  people  in  our  own  organiza- 
tion on  our  pay  rolls  and  directly  concerned  in  our  pros- 
perity. I  believe  it  can  be  conservatively  stated  that  allowing 
four  dependents  to  each  worker,  we  have  approaching 
three  quarters  of  a  million  people  whose  prosperity  and 
happiness  is  directly  concerned  with  ours. 

"Third.  We  have  our  dealer  organization.  There  are 
in  the  aggregate  something  like  18,000  dealers.  If  we 
assume,  and  I  think  we  have  a  right  to  assume,  that  each 
dealer  would  average  twenty-five  employees,  I  really  think 
it  is  much  higher  than  that,  we  have  something  like  500,- 

000  dealers  and  members  of  their  direct  organization,  with 
their  dependents  a  total  of  over  2,000,000.  I  estimate  these 
dealers  are  employing  a  capital  of  over  $500,000,000. 

"Fourth.  Next  we  have  over  4,600  suppliers  of  material. 

1  haven't  any  idea  how  many  workers  are  involved  in  the 
organization    of    those    suppliers    applicable    to    General 
Motors  production,  but  as  you  can  well  appreciate,  it  is 
very  large. 

"Fifth.  We  have  the  enormous  aggregation  of  people 

number  of  stockholders  increased  to  372,000  from  1927  to  1933. 

332  The  Turning  Wheel 

whose  prosperity  depends,  in  turn,  upon  the  prosperity  of 
those  I  have  mentioned  above — their  purchasing  power,  in 
other  words.  As  a  matter  of  fact,  there  are  several  cities  of 
importance  in  the  United  States  whose  prosperity  is  abso- 
lutely linked  up  with  the  prosperity  of  General  Motors. 

"I  have  estimated  that  a  very  appreciable  percent  of  the 
total  population  of  the  United  States  is  directly  affected  by 
the  prosperity  of  General  Motors.  Expressed  otherwise, 
the  happiness  of  an  enormous  group  of  citizens  is  dependent 
upon  the  establishment  of  sound  principles  of  administra- 
tion in  General  Motors  and  the  development  of  sound 
thinking  in  the  formation  of  its  programs  and  policies. 

"I  mention  all  the  above  to  give  you  some  appreciation 
of  what  General  Motors  includes,  and  a  better  appreciation 
of  what  our  whole  industry  includes  because,  naturally,  the 
whole  must  be  larger  than  any  part.  The  responsibility  is 
tremendous,  and  although  it  is,  necessarily,  more  or  less 
divided,  yet  the  fact  remains  that  upon  a  very  limited  num- 
ber of  individuals  must  rest  the  responsibility  of  formulat- 
ing policies  and  principles  upon  which  this  vast  enterprise 
revolves  and  upon  which  its  future  depends. 

"Recognizing  the  responsibility  that  rests  upon  us,  I  want 
to  deal  next  with  certain  things  that  we  are  doing  that,  in 
our  judgment,  have  not  only  contributed  much  to  our  prog- 
ress, but  which,  in  my  opinion,  if  fully  appreciated,  should 
add  a  sense  of  great  security  to  those  whose  prosperity  and 
happiness  is  so  intimately  linked  up  with  us. 

"To  illustrate  my  point,  I  want  to  tell  you  a  true  story 
of  what  happened  in  General  Motors  in  1920. 

"In  the  spring  of  1920,  General  Motors  found  itself,  as 
it  appeared  at  the  moment,  in  a  good  position.  On  account 
of  the  limitation  of  automotive  production  during  the  war 
there  was  a  great  shortage  of  cars.  Every  car  that  could 
be  produced  was  produced — and  could  be  sold  at  almost  any 
price.  So  far  as  any  one  could  see,  there  was  no  reason 
why  that  prosperity  should  not  continue  for  a  time  at  least. 
I  liken  our  position  then  to  a  big  ship  in  the  ocean.  We  were 
sailing  along  at  full  speed,  the  sun  was  shining,  and  there 
was  no  cloud  in  the  sky  that  would  indicate  an  approaching 
storm.  Many  of  you  have,  of  course,  crossed  the  ocean  and 

The  Point  of  View  of  General  Motors     333 

you  can  visualize  just  that  sort  of  a  picture — yet  what  hap- 
pened? In  September  of  that  year,  almost  over  night,  values 
commenced  to  fall.  The  liquidation  from  the  inflated  prices 
resulting  from  the  war  had  set  in.  Practically  all  schedules 
or  a  large  part  of  them  were  cancelled.  Inventory  com- 
menced to  roll  in,  and,  before  we  realized  what  was  hap- 
pening, this  great  ship  of  ours  was  in  the  midst  of  a  terrific 
storm.  As  a  matter  of  fact,  before  control  could  be  obtained 
General  Motors  found  itself  in  the  position  of  having  to  go 
to  its  bankers  for  loans  aggregating  $80,000,000  and 
although,  as  we  look  at  things  from  today's  standpoint,  that 
isn't  such  a  very  large  amount  of  money,  yet  when  you  must 
have  $80,000,000  and  haven't  got  it,  it  becomes  an  enor- 
mous sum  of  money,  and  if  we  had  not  had  the  confidence 
and  support  of  the  strongest  banking  interests  our  ship  could 
never  have  weathered  the  storm. 

uNow,  as  a  result  of  that  experience,  which  was  at  the 
time  the  present  administration  came  into  the  picture,  we 
recognized  that  our  first  duty  was  to  obtain  a  proper  con- 
trol over  the  operations  of  this  big  ship.  We  should  not  be 
satisfied  to  go  along,  unconcernedly,  when  times  were  good, 
with  no  thought  of  the  future.  We  should  first  devise 
scientific  means  of  administration  and  control  whereby  we 
should  be  able  to  project  ourselves  as  much  as  possible  into 
the  future  and  discount  changing  trends  and  influences  and, 
second,  that  we  should  be  prepared  at  all  times  to  alter  the 
course  of  this  ship  of  ours  promptly  and  effectively  should 
circumstances  develop  that  required  us  to  do  so.  This  has 
all  been  accomplished  and  I  feel  at  the  present  time,  dealing 
again  with  this  great  responsibility  that  falls  upon  our 
management,  that  no  matter  what  the  future  may  bring 
forth  or  no  matter  what  changes  may  take  place,  irrespec- 
tive of  how  suddenly  they  may  take  place,  we  have  at  all 
times  the  organization  and- machinery  to  deal  with  them  in 
such  a  way  that  the  adverse  effect  upon  the  great  interests 
that  we  represent  will  be  reduced  to^a  minimum. 

"At  the  time  specified,  General  Motors,  and  I  think  the 
same  applies  to  other  manufacturers,  never  had  any  regard 
for  the  number  of  unsold  cars  in  the  field.  The  sole  idea 
was  to  make  as  many  cars  as  the  factory  could  possibly 

334  The  Turning  Wheel 

turn  out  and  have  the  sales  department  force  the  dealers 
to  take  and  pay  for  those  cars  irrespective  of  the  economic 
justification  of  so  doing — I  mean,  irrespective  of  the 
dealers'  ability  properly  to  merchandise  such  cars.  That 
was  wrong  and  it  is  just  as  wrong  in  other  industries  as  it 
was  in  ours.  The  quicker  merchandise  can  be  moved  from 
the  raw  material  to  the  ultimate  consumer  and  the  less  mer- 
chandise, of  whatever  it  may  consist,  is  involved  in  the 
'float,'  so  to  speak,  the  more  efficient  and  more  stable  in- 
dustry becomes. 

"To  my  mind,  one  of  the  strongest  factors  influencing 
continued  prosperity,  or  expressed  otherwise,  one  of  the 
strongest  influences  operating  against  a  sharp  reaction  in 
industry,  is  the  fact' that  American  business  today  is  largely 
conducted  on  that  basis.  As  a  matter  of  fact,  the  war  taught 
us  that  lesson.  The  automotive  industry  is  particularly 
fortunate  in  dealing  with  large  units  of  relatively  large 
value  and  of  having  direct  contacts  with  the  retailers  from 
whom  proper  statistics  can  be  developed.  In  General 
Motors,  we  receive  reports  from  our  18,000  dealers  three 
times  a  month.  These  reports  inform  us  as  to  the  number 
of  cars  they  have  on  hand — usually  the  models  they  have 
on  hand.  Also  as  to  the  number  of  used  cars  on  hand  as 
well  as  the  number  of  forward  orders  booked  for  future 
delivery.  Upon  these  reports  the  manufacturing  schedules 
that  involve  our  180,000  direct  employees,  our  4,600  sup- 
pliers, and  each  and  every  one  of  our  operations,  at  home 
or  abroad,  are  developed. 

"The  movement  of  merchandise  into  the  hands  of  the 
ultimate  consumer  is  our  fundamental  index,  and  it  should 
be  the  fundamental  index  of  every  business  to  the  fullest 
degree  possible.  It  is  absolutely  against  the  policy  of  Gen- 
eral Motors  to  require  dealers  to  take  cars  in  excess  of  the 
number  they  properly  should 'take.  Naturally,  once  in  a 
while  in  the  closing  out  of  a  model,  our  dealers  must  neces- 
sarily help  us.  They  appreciate  their  responsibility,  and 
never  object  to  doing  so.  Our  policy  in  formulating  our 
production  schedules  is  to  err,  if  we  must  err,  on  the  con- 
servative side.  Naturally,  errors  of  judgment  will  occur,  as 
it  is  difficult  to  forecast  the  consumer  demand,  five  months 

The  Point  of  View  of  General  Motors     335 

ahead,  as  we  have  to  frequently,  but  we  are  able  to  come 
remarkably  close. 

"We  publish  each  month,  in  order  that  the  whole  world 
may  know,  exactly  what  the  movement  of  cars  to  the  ulti- 
mate consumer  is  in  order  that  those  interested  in  the 
statistical  side  of  American  industry  may  take  that  for 
what  it  is  worth  as  a  measure  of  the  general  business  trend. 

"We  have  developed  a  system  whereby  we  forecast  each 
month  for  the  current  month  and  three  succeeding  months, 
every  detail  of  our  operations — production,  sales,  overhead, 
profits,  inventory,  commitments,  cash,  and  all  the  other  ele- 
ments that  are  involved  in  an  operation  like  ours.  We  have 
developed  this  procedure  to  a  remarkable  degree  of  accu- 
racy. I  think  it  would  be  safe  to  say  that  all  of  these  indices, 
with  the  procedure  we  now  have,  are  forecast  within  a  very 
close  percentage.  We  are  able,  therefore,  to  look  forward 
and  provide  for  the  future  with  the  assurance  that  we  know 
very  closely  at  all  times  where  we  will  stand  four  months 

"After  all,  everything  I  have  told  you  can  be  expressed 
in  two  words — proper  accounting,  and  I  now  come  to  the 
point  where  I  want  to  outline  to  you  what  I  believe  to  be  a 
great  weakness  in  the  automotive  industry  today  and  what 
General  Motors  is  trying  to  do  to  correct  that  weakness. 

"I  have  stated  frankly  to  General  Motors  dealers,  in 
almost  every  city  in  the  United  States,  that  I  was  deeply 
concerned  with  the  fact  that  many  of  them,  even  those  who 
were  carrying  on  in  a  reasonably  efficient  manner,  were  not 
making  the  return  on  their  capital  that  they  should.  Right 
here  let  me  say  that  so  far  as  General  Motors  dealers  are 
concerned,  from  what  facts  I  have,  I  realize  there  has 
been  much  improvement  during  the  past  two  or  three  years, 
but  interested  as  the  management  of  General  Motors  must 
be  in  every  step,  from  the  raw  material  to  the  ultimate 
consumer,  and  recognizing  that  this  chain  of  circumstances 
is  no  stronger  than  its  weakest  link,  I  feel  a  great  deal  of 
uncertainty  as  to  the  operating  position  of  our  dealer 
organization  as  a  whole.  I  hope  that  this  feeling  of  uncer- 
tainty is  unwarranted.  I  am  sure  that  with  a  responsibility 
so  great,  all  elements  of  uncertainty  must  be  eliminated 

336  The  Turning  Wheel 

and  that  our  dealers  should  know  the  facts  about  their 
operating  position  as  clearly  and  as  scientifically  as  we  feel 
that  we  know  the  facts  about  General  Motors  operating 
position,  just  outlined. 


"We  consider  our  dealers  partners  in  our  business.  It  is 
true  they  operate  on  their  own  account,  but  they  are,  never- 
theless, partners  in  the  sense  that  their  prosperity  is  linked 
up  with  our  prosperity,  and  all  good  partners  should  recog- 
nize the  necessities  of  each  to  the  other  and  they  should  co- 
operate so  that  all  weaknesses  can  be  eliminated.  This  is 
exactly  what  General  Motors  is  doing  in  this  connection. 
We  have  organized  a  subsidiary  whose  sole  function  will 
be  to  establish  proper  accounting  systems  wherever  desired 
by  our  dealers.  We  will  audit  such  accounts  periodically  in 
order  that  our  dealers  may  have  the  assurance  that  their 
records  are  properly  established,  and  that  the  facts  that 
come  to  them  are  facts  rather  than  fiction.  We  feel  that 
with  the  great  amount  of  specific  knowledge  we  have,  in- 
volving all  phases  of  the  automotive  business,  and  with  an 
organization  that  specializes  in  this  particular  branch  of 
accounting,  with  nothing  else  to  think  of,  we  can,  through 
evolution  and  with  the  cooperation  of  our  dealers,  place 
before  them  facts  and  figures  that  will  indicate  to  them 
very  clearly  what  they  should  do  and  what  they  should  not 
do.  I  do  not  think  there  is  anything  that  will  contribute  more 
to  our  complete  stabilization  than  an  accomplishment  of 
this  kind.  I  do  not  think  there  is  anything  that  will  establish 
greater  confidence  in  the  minds  of  the  banking  interests 
whose  cooperation  we  must  have  in  carrying  on.  Some  time 
ago  I  saw  it  stated,  and  I  believe  it  is  absolutely  correct, 
that  if  business,  using  that  term  in  its  broadest  sense,  were 
equipped  with  proper  accounting,  a  very  large  percentage 
of  the  failures  and  losses  incident  thereto  could  be  elimi- 
nated. We  hope  to  be  able,  in  due  course  of  time,  to  place 
before   our   dealers   'bogeys/    I   might   say,   showing   the 
proper  relationship  of  each  expense  item  to  the  business  as 
a  whole  with  the  result  that  if  a  dealer  will  conduct  his 

The  Point  of  View  of  General  Motors     337 

affairs  along  the  lines  that  we  can  ultimately  outline  to  him, 
he  will,  in  a  sense,  take  the  straight  and  direct  course  to 
a  reasonable  and  fair  profit. 

"I  have  told  my  associates  time  and  time  again,  that  with 
this  program  of  ours  accomplished  to  the  degree  that  I  am 
hopeful  that  it  can  be  accomplished,  it  will  be  the  greatest 
achievement  of  General  Motors. 

"Every  once  in  a  while  my  attention  is  called  to  items  in 
the  papers  that  you  gentlemen  are  publishing — statements 
to  the  effect  that  this  General  Motors  line  or  that  General 
Motors  line  is  going  to  be  discontinued.  That  is  unfair  to 
your  readers  who  have  invested  in  those  particular  cars; 
it  is  unfair  to  the  dealers  handling  those  lines,  and  it  is 
unfair  to  General  Motors.  It  is  unfair  to  you  because  you 
want  to  tell  the  facts.  I  will  take  a  few  minutes  to  tell  you 
exactly  what  our  policy  is  in  this  regard. 

"It  is  our  hope  and  ambition  to  develop  a  complete  line 
of  motor  cars  from  the  low-priced  group  to  the  high- 
priced  group  within  the  limitations  of  reasonable  quantity 
production.  It  is  our  hope  and  ambition  to  make  each  of 
those  lines  of  cars  represent  a  greater  value  than  anyone 
else  can  offer.  It  is  our  hope  and  ambition  so  to  develop 
the  confidence  of  the  buying  public  in  our  policies  and  pur- 
poses, as  to  have  it  feel  that  whatever  price  car  may  be 
needed,  the  most  outstanding  value,  from  every  point  of 
view,  is  in  the  General  Motors  line.  Much  has  been  accom- 
plished in.  that  direction,  but  no  one  appreciates  more  than 
I  do  that  much  more  can  and  will  be  accomplished.  It  was 
in  the  development  of  this  program  that  we  added  the 
Pontiac,  and  it  was  also  in  the  development  of  the  same 
program  that  we  added  the  La  Salle. 

"Should  we  feel  that  our  line  of  cars  at  any  time  is,  for 
any  reason,  incomplete,  we  will  add  other  lines  to  the  end 
that,  from  the  highest  price  group  to  the  low  price  group 
there  will  be  a  General  Motors  car  with  reasonable  differ- 
ence in  price,  to  fit  the  purse  and  purpose  of  all,  and  they 
will  all  be  quality  cars — you  may  be  sure  of  that.  We  will 
never  make  the  fatal  mistake  of  sacrificing  quality  for 
price.  All  that  I  have  said  means,  expressed  otherwise,  that 
there  is  no  possibility  or  probability  of  any  of  the  present 

338  The  Turning  Wheel 

lines  being  discontinued.  On  the  other  hand,  they  will  be 
expanded  and  improved  and  made  more  effective  and  more 
efficient  as  the  ability  of  the  General  Motors  organization 
makes  this  possible. 

"As  a  result  of  the  policy  just  outlined  we  have  already 
made  substantial  progress;  we  have  increased  the  propor- 
tion of  General  Motors'  new  cars  registered  in  the  United 
States  from  one  in  six  to  better  than  one  in  three.  We  have 
increased  our  retail  sales  during  the  past  three  years  to 
the  point  where,  this  year,  we  expect  to  sell  at  retail,  in 
excess  of  one  and  one  half  million  motor  cars.  We  have  ex- 
panded our  business  in  volume  during  the  past  three  years 
to  over  $1,000,000,000  annually.  Our  organization  recog- 
nizes that  there  is  much  to  be  accomplished,  and  I  am  sure 
that  it  will  be  accomplished.  We  are  on  our  way. 

"General  Motors  profits,  like  its  business,  have  increased 
rapidly  during  the  past  two  or  three  years.  In  1926  they 
were  something  like  $190,000,000.  If  the  balance  of  1927 
continues  along  our  forecast,  the  earnings  of  General 
Motors  during  the  last  six  months  should  be  as  good  as  the 
last  six  months  of  1926.  I  am  in  hopes  they  will  be  a  little 
better.  Now,  this  aggregation  of  profits  is  the  largest  that 
any  corporation  has  ever  made  in  times  of  peace  and,  as  a 
matter  of  fact,  has  ever  made  in  the  whole  history  of  in- 
dustry with  the  exception  of  a  single  instance  in  times  of 
war.  Unfortunately,  this  has  led  to  a  false  impression  due 
to  a  lack  of  understanding  of  the  facts,  that  General  Motors 
must  be  making  a  very  large  profit  per  car.  This  is  abso- 
lutely not  true.  General  Motors  profit  per  car  is  less  today 
than  it  has  been  at  any  time  except  the  one  year  in  which 
we  made  no  profit  or,  as  a  matter  of  fact,  made  a  loss. 

"The  statement  that  I  made  as  to  the  increase  in  our 
profit  account  and  the  statement  I  have  just  made  as  to  re- 
duction in  profit  per  car,  may  appear  to  you  to  be  somewhat 
contradictory.  I  think,  therefore,  that  I  should  perhaps 
explain  the  statement  a  little  more  in  detail.  It  is  not 
realized  that  General  Motors  profits  come  from  many  dif- 
ferent sources.  As  a  matter  of  fact,  not  more  than  half 
the  Corporation's  profits  come  from  the  manufacture  of 
motor  cars  in  the  sense  that  other  manufacturers  produce 

The  Point  of  View  of  General  Motors     339 

motor  cars.  Our  motor-car  operations  are,  I  think,  equally, 
if  not  more  completely  self-contained  than  those  of  com- 
petitors and  yet,  as  I  said  before,  they  contribute  less  than 
one  half  to  our  profit  account. 

"You  will  agree  with  me,  I  am  sure,  that  when  we  are 
charged  with  the  responsibility  that  I  so  thoroughly  out- 
lined to  you,  when  we  invest  our  stockholders'  money  as 
trustees,  we  must  do  it  in  the  firm  belief  that  the  capital  is 
safely  invested  and  that  the  return  to  the  stockholders,  as 
a  result  of  the  investment,  will  be  fair  and  equitable ;  other- 
wise we  have  no  right  to  make  the  investment  at  all.  The 
stockholders'  investment  during  the  past  three  years  has 
increased  roughly  $400,000,000.  This  investment  carries 
with  it  an  obligation  as  to  a  return.  Part  of  this  money  has 
been  invested  in  the  expansion  of  our  motor-car  operations 
directly  in  increasing  capacity  of  existing  lines  and  in  the 
establishment  of  the  Pontiac  and  the  La  Salle,  but  very 
large  sums  of  money  have  gone  in  entirely  different  direc- 
tions, viz.,  in  expanding  and  establishing  new  activities  en- 
tirely independent  of  the  motor-car  operations,  and  some 
even  outside  the  automotive  industry. 

"We  have  $50,000,000  invested  in  the  General  Motors 
Acceptance  Corporation,  the  functions  of  which  I  will  men- 
tion to  you  later.  This  $50,000,000,  being  stockholders' 
money,  is  entitled  to  make  a  fair  return  consistent  with  a 
normal  banking  operation.  We  have  tens  of  millions  of 
dollars  invested  in  accessory  operations  which  contribute 
a  reasonable  return  to  the  stockholders  and,  naturally,  add 
to  the  profit  account.  We  manufacture  roller  and  ball  bear- 
ings for  all  purposes  including  railroad  cars;  and  electric 
light  plants  for  farm  lighting.  Through  our  Fisher  Body 
division  we  build  our  own  bodies  from  beginning  to  end. 
We  own  timber  tracts  and  saw-mills.  We  carry  the  opera- 
tions all  the  way  from  the  forest  to  the  dealer.  This  takes 
capital,  and  that  capital  is  entitled  to  a  return,  and  the 
return  increases  the  total  profits. 

"We  operate  the  Frigidaire,  having  about  $40,000,000 
invested.  We  believe  the  electrical  refrigeration  industry 
is  destined  to  be  a  very  great  industry.  It  goes  without 
saying  that  that  has  nothing  to  do  with  the  automotive 

340  The  Turning  Wheel 

industry,  and  its  contribution  to  the  stockholders'  profits 
has  nothing  to  do  with  the  profits  per  motor  car,  yet  the 
support  of  the  Frigidaire  Corporation  to  the  stockholders' 
profits  is  very  substantial,  and  it  is  increasing. 

"We  have  employed  at  the  present  time,  something  like 
$50,000,000  in  overseas  operations;  in  assembly  plants  and 
in  merchandising  operations  abroad.  The  stockholders  are 
entitled  to  a  return  on  this  as  well  as  they  are  on  other 
investments  I  have  mentioned.  It  is  not  necessary  that  we 
should  do  this.  We  could  sell  our  cars  f.o.b.  New  York 
for  cash  and  have  them  distributed  by  others.  In  that  way 
we  would  employ  less  capital,  but  our  stockholders,  of 
course,  would  not  get  the  return.  The  advantage  of  doing 
it  our  way  is  that  we  can  do  a  bigger  and  better  business. 
We  can  reduce  the  price  of  the  cars  in  overseas  countries. 
We  therefore  sell  more  cars  and  we  can  make  all  the 
cars  at  a  lower  cost  in  consequence.  We  can  also  paint  and 
trim  the  cars  more  to  the  liking  of  the  people  in  those 
countries.  We  employ  labor  and  purchase  material  in  those 
countries,  and  in  that  way  we  make  ourselves  more  a  part 
of  the  industrial  life  of  each  country.  What  is  the  result? 
A  good  return  on  the  additional  capital  employed  for  the 
stockholders;  an  increase  in  the  volume  of  business,  mean- 
ing additional  profits;  a  lowering  of  the  cost  of  all  cars 
produced,  hence  greater  value  at  both  home  and  abroad. 
All  concerned  are  benefited. 

"I  might  go  on  further  and  point  out  to  you  many  other 
activities  that  we  have  that  are  very  seldom  thought  of, 
all  of  which  must  make  a  return.  Still  in  addition  to  this, 
and  it  is  an  important  consideration,  through  our  growing 
production  necessities  we  are  required  to  make  more  and 
more  of  our  own  parts.  We  can  usually  make  them  better 
and  at  a  lower  cost.  It  is  not,  however,  our  policy  to  do 
this  unless  we  can  get  such  results,  but  where  we  can  add 
value  to  our  cars  and  make  a  reasonable  return,  we  feel  it 
is  our  duty  to  the  responsibility  we  carry  to  do  this.  For 
all  additional  capital  General  Motors  employs  in  extend- 
ing its  operations,  other  things  being  equal,  there  must  be  a 
proportionate  increase  in  profits.  Each  dollar  must  make 
a  showing  for  itself.  If,  for  illustration,  $100,000,000  were 

The  Point  of  View  of  General  Motors     341 

left  in  the  business  out  of  a  given  year's  earnings,  and  a 
reasonable  return  on  that  $100,000,000  is  15  percent,  then 
the  next  year's  profits  should  increase,  all  things  being 
equal,  by  $15,000,000  or  we  will  not  have  done  a  con- 
structive thing. 

"A  few  words  about  our  organization  itself.  We  operate 
on  the  principle  of  what  I  might  term  a  decentralized 
organization.  I  mean  by  that,  each  one  of  our  operations 
is  self-contained,  is  headed  by  an  executive  who  has  full 
authority  and  is  responsible  for  his  individual  operation. 
We,  naturally,  think  that  this  is  the  best  scheme  of  organ- 
ization or  we  would  not  adopt  it.  Our  responsibilities  are 
so  great,  the  necessity  of  quick  action  and  prompt  decision 
is  so  great  and  contributes  so  much  increased  efficiency  and 
effectiveness,  that  it  is  about  the  only  way  a  business  of  the 
magnitude  of  General  Motors  could  be  conducted.  It  also, 
I  think,  has  the  very  great  advantage  of  developing 
executive  ability  and  initiative  on  the  part  of  a  greater 
number  of  individuals.  All  the  members  of  our  organization 
appreciate  what  is  absolutely  true — that  they  have  a  real 
function  to  perform  and  that  upon  their  initiative,  their 
industry,  and  the  constructiveness  of  their  decisions  as  a 
whole,  depend  the  success  of  the  institution  as  a  whole. 
Coordination  is  effected  through  what  we  call  Inter- 
Divisional  Relations  Committees,  where  those  interested 
in  the  same  functions  of  the  important  divisions  meet  to- 
gether and  discuss  their  own  problems  as  well  as  the  same 
problems  from  the  standpoint  of  Corporation  policy.  For 
instance,  our  purchasing  agents  meet  together  in  the  form 
of  a  General  Purchasing  Committee,  presided  over  by  a 
vice-president  of  the  Corporation.  If  it  is  found  that  one 
or  more  of  the  divisions  can  profit  by  purchasing  as  one 
unit,  then  we  purchase  as  General  Motors  and  all  profit. 
If  it  is  found  that  there  is  nothing  gained,  we  do  not  do  so. 
In  that  event  the  purchase  is  by  the  individual  operations 
as  their  judgment  may  determine.  In  that  way  we  get  in- 
dividual initiative,  and  at  the  same  time  we  do  not  overlook 
anything  from  the  Corporation  standpoint. 

"In  addition  to  this,  the  Corporation  maintains  an  or- 
ganization in  Detroit  as  an  advisory  service  for  the  benefit 

342  The  Turning  Wheel 

of  all.  General  Motors  Research  which  you  have  visited, 
acts  in  a  consulting  capacity  for  the  engineering  depart- 
ments of  all  the  divisionss  and  IR  addition  to  this,  is  con- 
stantly searching  for  new  principles  and  ideas  of  a  more 
fundamental  and  scientific  character  than  would  be  pos- 
sible for  any  of  the  individual  engineering  departments, 
which  must  be  more  concerned  with  immediate  production 
problems.  Legal  and  patent  problems,  as  well  as  account- 
ing and  financial  control,  are  handled  in  a  similar  manner. 
Sales  research  is  also  a  very  important  activity.  In  no  case, 
however,  is  the  responsibility  taken  away  from  the  head 
of  each  division.  When  differences  of  opinion  arise,  and 
differences  of  course  do  arise,  they  are  discussed  and  con- 
sidered from  every  standpoint.  In  every  case  that  I  can 
remember  since  I  have  been  operating  in  the  past  three 
years,  as  a  result  of  such  discussion,  everybody  was  agreed 
as  to  the  proper  course  to  pursue. 

"Some  months  ago,  I  sent  a  message  to  our  stockholders, 
entitled,  'How  Members  of  the  General  Motors  Family 
Are  Made  Partners  in  General  Motors/  In  this  I  explained 
the  attitude  of  General  Motors  toward  its  organization — 
those  who  make  it  what  it  is,  and  what  it  will  be  in  the 
future.  I  shall  be  glad  to  send  any  of  you  a  copy  of  that 
message.  After  all,  the  tens  of  millions  of  dollars  we  may 
have  in  banks,  the  hundreds  of  millions  of  dollars  invested 
in  various  ways,  our  plants  and  their  equipment  through- 
out the  world,  all  are  of  comparatively  little  value  without 
an  intelligent  and  effective  organization.  It  is  easier  to  re- 
place all  the  former  than  it  is  the  latter.  We  have  recog- 
nized that  principle  by  developing  plans  whereby  the 
organization  itself  profits  through  its  own  endeavors  as 
partners — in  other  words,  receives  something  in  addition 
to  a  daily  wage.  This  applies  to  one  and  all.  Time  will  not 
permit  me  to  go  into  detail.  I  just  want  to  say  that  I  believe 
that  this  principle  of  the  organization's  participation  in  the 
result  that  they  themselves  accomplish  is  not  only  sound 
economically  and  equitably,  but  is  the  best  kind  of  business 
from  the  stockholders'  standpoint. 

"A  word  about  our  policy  of  telling  the  facts  about  Gen- 
eral Motors.  We  believe  in  frankly  telling  our  stockholders 

The  Point  of  View  of  General  Motors     343 

and  the  public  all  the  things  that  we  can  consistently.  As  I 
have  already  said,  we  report  monthly  our  retail  and  whole- 
sale sales  so  that  everybody  may  know.  We  send  quarterly, 
to  our  stockholders,  detailed  statements  of  the  financial 
position  of  General  Motors  as  well  as  its  operating  posi- 
tion. I  make  it  a  point  to  send  messages  several  times  a 
year  to  our  stockholders,  telling  them  of  things  that  we  are 
doing  and  why  we  are  doing  them  so  that  they  will  get  a 
complete  understanding  of  our  viewpoints.  In  our  annual 
report  we  try  to  state  all  the  facts  the  stockholders  should 
know.  We  knowingly  hold  back  no  information  that  they 
are  entitled  to  as  partners  in  the  business.  I  feel  that  this 
policy  on  the  part  of  General  Motors  has  contributed  much 
to  the  feeling  of  good-will  that  exists  toward  the  Corpora- 
tion, not  only  throughout  this  country,  but  throughout  the 
entire  world. 

"The  story  I  told  you  about  the  position  of  General 
Motors  in  1920  and  my  viewpoint  of  the  greatest  necessity 
in  our  dealer  situation,  leading  up  to  the  two  words — 
Proper  Accounting — might  be  expressed  in  still  another 
way,  this  time  in  three  words : — Get  the  Facts. 

"There  is  a  very  fundamental  principle,  the  importance 
of  which  I  am  continually  trying  to  impress  upon  our  direct 
organization  as  well  as  our  dealers;  viz.,  Get  the  Facts. 

"I  would  now  like  to  tell  you  some  of  the  things  we  do 
in  General  Motors  to  get  the  facts. 

"Let  me  tell  you  about  what  we  call  our  field  trips.  It 
may  surprise  you  to  know  that  I  personally  have  visited, 
with  many  of  my  associates,  practically  every  city  in  the 
United  States  from  the  Atlantic  to  the  Pacific  and  from  the 
Gulf  of  Mexico  to  the  Canadian  border.  If  any  of  you 
has  done  this,  you  realize  what  a  big  country  it  is.  It  has 
taken  weeks  and  weeks  of  the  hardest  kind  of  work  and 
continual  travel  to  accomplish  this.  I  wish  that  my  duties 
were  such  that  I  could  do  more  of  it;  and  I  am  trying  to 
arrange  my  affairs  so  that  I  can.  In  these  trips  I  visit  from 
five  to  ten  dealers  per  day.  I  meet  them  in  their  own  places 
of  business,  talk  with  them  across  their  own  desks  and 
solicit  from  them  suggestions  and  criticisms  as  to  their  re- 
lations with  the  Corporation;  the  character  of  the  product; 

344  The  Turning  Wheel 

the  Corporation's  policies;  the  trend  of  the  consumer  de- 
mand; their  viewpoint  as  to  the  future,  and  many  other 
things  that  such  a  contact  makes  possible.  I  solicit  criticism 
of  anything  and  everything.  I  make  careful  notes  of  all  the 
points  that  come  up  that  are  worth  while,  and  when  I  get 
back  home  I  study  and  develop  those  points  and  capitalize 
them  so  far  as  possible.  The  reason  for  all  this  is  that 
irrespective  of  how  efficient  our  contact  through  our 
regular  organizations  may  be,  our  men  in  the  field  are 
charged  with  doing  specific  things  and  that  takes  all  their 
time  and  effort.  I  go  out  from  the  standpoint  of  general 
policies  and  get  the  facts  in  a  very  personal  way  without 
the  intermediary  of  an  organization,  which  is  apt  to  over- 
look the  most  important  points  and  inject  its  own  personal 
views  on  such  points  as  it  does  get.  I  believe  that  this  work 
that  we  have  done  has  contributed  much  more  than  any  of  us 
appreciates  to  the  progress  that  General  Motors  has  made. 

"You  have  gone  through  our  Research  Laboratories  and 
have  some  idea  of  what  it  is  all  about.  It  is  no  different 
from  our  field  trips,  in  principle.  We  are  searching  for  the 
facts  that  we  may  know  more  about  the  fundamentals  and 
be  able  to  add  value  to  the  performance  and  effectiveness 
of  our  products,  just  the  same  as  in  the  field  work  we  are 
trying  to  learn  more  about  the  distribution  of  our  products. 
We  send  representatives  abroad  to  study  foreign  methods 
and  foreign  cars.  We  have  an  engineering  office  in  London 
with  representatives  in  other  countries  to  keep  us  advised 
at  all  times  as  to  what  progress  there  may  be  along  Euro- 
pean lines  that  General  Motors  can  capitalize.  Again,  we 
are  seeking  the  facts. 

"The  Proving  Ground  here  is  also  dedicated  to  the  prin- 
ciple of  getting  the  facts.  As  you  see,  we  not  only  operate 
our  own  cars,  but  all  competitive  cars,  both  those  made  at 
home  and  abroad.  We  are  seeking  the  facts  about  all  of 
them  to  the  end  that  General  Motors  cars  are  better  cars. 
We  are  seeking  in  our  sales  activity  here  at  the  Proving 
Ground  to  impress  upon  our  dealers  the  facts  about  our  cars 
so  that  they  may  more  intelligently  present  them  to  the  con- 

The  Point  of  View  of  General  Motors    345 

"I  wish  I  could  get  a  definite  measure  of  the  relationship 
of  the  various  things  we  have  done,  one  to  the  other,  and 
their  contribution  to  the  whole,  but,  naturally,  a  thing  of 
that  kind  is  impossible.  I  feel,  however,  that  certain  prin- 
ciples which  we  have  developed  are  important  factors  in 
the  progress  we  have  made.  One  of  these  is  that  we  have 
tried  to  treat  everybody  fairly  and  squarely.  We  have  tried 
to  recognize  that  our  organization,  which  is  contributing 
everything  to  the  success  of  the  Corporation,  is  entitled  to 
participate  in  that  success — our  partnership  idea.  We  have 
also  tried  to  recognize  the  position  of  our  suppliers.  Of 
our  dealers  I  have  already  spoken.  As  to  the  public,  you 
only  have  to  compare  any  General  Motors  product  of  to- 
day and  its  price  with  the  corresponding  product  of  even 
two  years  ago  and  the  price  at  that  time:  more  beauty  in 
design;  more  luxury  in  appointment;  more  comfort  and 
convenience;  increased  performance  at,  in  nearly  all  cases, 
a  lower  price.  In  other  words,  greatly  increased  values.  We 
have  worked  conscientiously  and  intensively,  always  with 
the  interests  of  our  stockholders  as  our  guide.  Naturally, 
we  are  not  perfect  in  carrying  out  these  policies  and 
ambitions  of  ours,  but  we  do  the  very  best  that  we  can  and 
feel  that  we  are  continually  making  improvement.  There- 
fore, the  first  factor  I  believe  should  be  trying  to  treat 
everybody  fairly  and  squarely.  Then  we  are  trying,  as  I 
said  before,  to  get  the  facts.  My  experience  in  business  is 
that  facts  are  too  little  considered  in  making  decisions.  It  is 
difficult  to  get  the  facts — to  get  all  the  facts,  but  it  is  worth 
every  effort  and  we  put  forth  that  effort.  Then,  with  the 
facts  before  us,  we  try  to  approach  the  decision  with  an 
open  mind. 

"We  recognize  that  we  must  be  conservative.  Our  re- 
sponsibilities are  too  great  to  be  otherwise.  We  cannot  take 
chances,  yet  we  must  progress.  We  try  to  recognize  that 
what  we  do  today,  whatever  measure  may  be  placed  upon 
it,  must  be  improved  tomorrow;  next  week's  performance 
must  beat  tomorrow's,  and  next  month's  and  next  year's 
must  beat  that  of  the  previous  month  or  year.  Therefore, 
to  sum  up,  we  get  these  factors :  a  recognition  of  the  equities 
of  all  concerned;  getting  the  facts;  analyzing  the  facts 

Weather  Bureau  Station,  General  Motors  Proving  Ground, 
Milford,  Michigan 

Entrance  to  General  Motors  Proving  Ground,  Milford,  Michigan 


The  Point  of  View  of  General  Motors    347 

with  an  open  mind.  These,  to  my  mind,  are  the  principles 
which  have  contributed  most  to  the  present  position  of  Gen- 
eral Motors  and  to  the  progress  that  it  has  made  during 
the  past  few  years.  This  leads  me  to  the  last  point — the 
necessity  of  capitalizing  the  principles  that  we  elected  to 
guide  us  forward.  This  can  only  be  accomplished  in  one 
way:  hard  work. 

"It  seems  sometimes — each  one  of  you  has  seen  such 
cases — that  results  are  accomplished  without  hard  work,  but 
I  think  you  will  agree  with  me  that  in  the  long  run  it  does 
not  work  out  that  way.  In  any  event,  I  hope  that  General 
Motors  will  never  attempt  that  sort  of  an  experiment. 

"Therefore,  our  principles  completely  expressed,  as  I  see 
them,  and  they  apply  to  every  other  business  as  much  as 
they  do  to  that  of  General  Motors,  are:  Get  the  facts. 
Recognize  the  equities  of  all  concerned.  Realize  the  neces- 
sity of  doing  a  better  job  every  day.  Keep  an  open  mind 
and  work  hard.  The  last,  gentlemen,  is  the  most  important 
of  all.  There  is  no  short  cut." 

Chapter   XXV 


N  DISCUSSING  the  purchases  of  interests  in  other  com- 
panies, it  was  noted  that  in  most  cases  General  Motors 
followed  the  practice  of  buying  all  or  part  of  the  agreed 
shares  in  the  open  market,  with  the  result  that  a  number  of 
purchases  were  completed  without  changing  the  stock  struc- 
ture of  the  Corporation  even  though  the  purchase  agree- 
ment was  stated  in  terms  of  stock. 

After  the  General  Motors  Corporation  succeeded  the 
General  Motors  Company  on  October  13,  1916,  only  in  the 
following  cases  was  Common  stock  originally  issued  in  the 
acquisition  of  properties : 




May  2,  1918  282,684  Chevrolet  Motor  Co.  of  Delaware 

Nov.  I,  1918         49,000  Canadian  Units 

Dec.  31,  1918       99,401.7  United  Motors  Corporation 

Dec.  31,  1918        16,175  Lancaster  Steel  Products  Co. 

Oct.  31,  1919        35,451  Domestic  Engineering  Co. 

Mar.  25,  1920      21,457         Dayton  Metal  Products  Co. 


The  Stockholder  Interest  349 


On  March  25,  1920,  140,000  shares  of  no  par  stock  were  ex- 
changed for  all  capital  stock  of  the  Chevrolet  Motor  Company  of 

As  of  June  30,  1926,  638,401  new  no  par  shares  of  the  Cor- 
poration were  issued  as  part  payment  for  the  minority  interest  of 
Fisher  Body  Corporation. 

In  the  foregoing,  and  other  purchases,  there  were  issued 
390,708  shares  of  6  percent  $100  par  Debenture  stock  and 
60,000  shares  of  7  percent  $100  par  Debenture  stock.  The 
last  instance  of  this  nature  was  in  October,  1929,  when 
40,000  shares  of  7  percent  Preferred  stock  were  issued  as 
part  payment  in  the  acquisition  of  the  North  East  Electric 

The  era  of  prosperity  began  for  the  Corporation  in 
1923,  when  net  sales  reached  a  new  high  level,  nearly 
$700,000,000 — earnings  on  which  left  $65,121,584  avail- 
able for  dividends  on  Common  stock,  the  largest  earned  for 
Common  stockholders  up  to  this  time.  Of  this  $24,772,026 
was  paid  in  dividends,  and  more  than  $40,000,000  re- 
invested in  the  business.  The  dividend  on  the  Common  no 
pa'r  stock  had  been  raised  to  30  cents  a  quarter  on  March 
15,  1923,  and  was  continued  at  that  rate  through  the  year. 

This  increase  in  dividends  reflected  both  the  growing 
prosperity  of  the  country  and  its  increasing  acceptance  of 
the  automobile  as  a  commonplace,  a  piece  of  property  so 
widely  owned  that  to  be  without  one  was  to  be  out  of 
fashion.  All  trades  catered  to  the  motorist.  Dry-goods 
stores  had  added  motoring  accessories,  sport  clothes,  and 
blankets.  Hardware  stores  carried  flashlights  and  tools. 
Automobile  supply  stores  were  growing  in  number  and 
size — a  new  development  in  merchandising.  Hotels  found 
a  new  and  profitable  business  in  the  motor  traveler.  The 
farmer  started  wayside  markets  to  reach  the  city  dweller. 
A  parts  and  accessory  business  had  brought  by  1923  a  turn- 
over in  excess  of  $1,750,000,000  through  retail  trade,  when 
clothing  and  other  motorist  supplies  are  included. 

Also,  an  intense  stimulus  had  been  given  to  the  search 
for  substitutes,  for  new  sources  of  raw  materials  and  the 

350  The  Turning  Wheel 

development  of  by-products.  A  particularly  noticeable  in- 
stance was  gasoline,  which  was  originally  the  by-product  of 
petroleum,  while  kerosene  was  the  mainstay.  The  motor 
industry  reversed  their  positions  and  built  a  far  greater 
industry  out  of  the  formerly  unimportant  by-product. 
"Countless  similar  situations  might  be  added  by  a  detailed 
and  careful  analysis,  all  weaving  closer  and  closer  the  vital 
and  mutually  advantageous  relationship  of  the  automo- 
bile and  allied  trades  and  industries."  The  motor  car  had 
become  an  essential  of  life  for  the  American  masses. 

On  June  16,  1924,  the  certificate  of  incorporation  was 
amended  to  provide  for  a  reduction  in  the  number  of  no  par 
Common  shares,  one  share  of  new  no  par  value  Common 
stock  being  given  for  each  four  shares  of  no  par  Common 
stock  then  outstanding.  This  reduced  the  number  of  shares 
outstanding  from  20,646,397  to  5,161,599.  At  the  same 
time  holders  of  the  6  percent  Debenture  and  6  percent  Pre- 
ferred stocks  were  given  the  right  to  exchange  their  stocks 
for  a  new  issue  of  7  percent  Preferred  stock,  on  payment  of 
$10  per  share  in  cash.  The  new  Common  stock  after  the 
exchange  of  one  new  share  for  four  old  shares,  registered 
high  and  low  prices  of  66%  and  55  ^4  in  1924,  but  the  next 
year  saw  it  rise  to  a  high  of  149^4.  This  stock  soared  to 
282*4  m  X927>  becoming  the  leader  in  the  remarkable 
"bull"  market  of  that  hopeful  year. 

Both  sales  and  earnings  dropped  somewhat  in  1924.  An 
initial  dividend  of  $1.25  on  the  new  Common  stock,  each 
share  of  which  represented  four  shares  of  the  old  no 
par  Common,  was  paid  December  12,  1924.  More  than 
$19,000,000  was  reinvested  in  the  business.  The  Corpora- 
tion's solid  position,  the  greater  market  appeal  of  the  new 
and  higher-priced  stock,  and  the  flourishing  condition  of 
the  country,  all  combined  to  focus  attention  on  General 
Motors  Common.  When  it  was  seen  that  the  disposition  of 
the  directors  was  to  pay  in  dividends  roughly  two  thirds  of 
earnings  to  Common  stockholders,  the  market  hesitation  on 
the  stock  ceased.  From  1924  through  1929  disbursements 
to  Common  stockholders  ranged  from  56.4  percent  of  avail- 
able earnings  to  65.6  percent.  With  the  decline  of  earnings 
in  1930,  the  ratio  rose  because  of  the  Corporation's  decision 

New  York  headquarters  of  General  Motors,  7775  Broadway,  as  seen 
from  Central  Park  across  Columbus  Circle 


352  The  Turning  Wheel 

to  maintain  dividends  as  part  of  a  policy  to  reinforce  the 
general  buying  power  of  the  public,  a  determination  which 
increased  the  number  of  its  stockholders  all  through  that 
discouraging  period. 

Mr.  Raskob,  as  chairman  of  the  Finance  Committee, 
exercised  a  great  influence  on  the  Corporation's  dividend 
policy.  A  hopeful  and  sanguine  man,  he  firmly  believed  that 
prompt  and  liberal  distribution  of  earnings  to  stockholders 
not  only  tended  to  maintain  general  prosperity,  but  also 
that  it  made  future  markets  for  General  Motors  cars  by 
increasing  directly  the  buying  power  of  those  already  well 
disposed  to  the  Corporation's  products  by  stock  owner- 
ship. The  various  stock  "split-ups"  and  stock  dividends 
were  motivated  by  the  reasoning  that  the  more  persons 
financially  interested  in  General  Motors,  the  greater  the 
number  of  potential  customers,  since,  other  things  being 
equal,  they  would  be  disposed  to  prefer  General  Motors 
products  to  those  of  other  manufacturers. 

Sales  for  the  year  1925  showed  a  decided  increase,  net 
income  available  for  dividends  exceeding  $100,000,000  for 
the  first  time  in  General  Motors  history.  Accordingly, 
extra  dividends  were  paid  on  Common  stock,  $i  on  Sep- 
tember 12,  1925,  and  $5  on  January  7,  1926,  and  the 
regular  quarterly  dividend  rose  to  $1.50.  Notwithstanding 
these  disbursements,  the  then  record  sum  of  $46,441,065 
was  reinvested  in  the  business.  The  liberal  investment 
policy  being  based  on  a  financial  position  of  increasing 
strength,  the  investing  public  pushed  the  price  of  the  new 
no  par  Common  stock  from  a  low  of  64^,  to  a  high  of 
149^4  during  the  year. 

A  Common  stock  dividend  was  declared  on  August  12, 
1926,  at  the  rate  of  one  half  share  of  Common  for  each 
share  outstanding.  This  change  in  the  capital  account 
raised  the  outstanding  shares  by  2,900,000  to  a  new  high 
of  8,700,000  for  the  no  par  issue  of  1924.  Cash  dividends 
for  the  year  reached  the  then  record  of  $103,930,993.  Not- 
withstanding, almost  $75,000,000  from  earnings  was  re- 
invested in  the  business.  It  is  noteworthy  that  in  1926 
General  Motors  paid  in  dividends  a  sum  in  excess  of  its 
net  sales  in  1915. 


Chairman  of  the  Board  of  Directors,  General  Motors  Corporation, 



354  The  Turning  Wheel 

An  important  change  in  the  Corporation's  capital 
structure,  approved  by  the  directors  on  August  n,  1927, 
was  adopted  by  the  stockholders  on  September  I2th,  in- 
creasing the  authorized  Common  stock  from  10,000,000 
no  par  shares  to  30,000,000  shares  of  $25  par  value.  Two 
shares  of  the  new  $25  stock  were  issued  for  each  of  the  no 
par  shares,  which  resulted  in  increasing  the  number  of  out- 
standing Common  shares  from  8,700,000  to  17,400,000. 

During  1926  the  Corporation  had  put  upwards  of  $100,- 
000,000  into  plant  extensions  and  improvements,  and  in 
permanent  investment  in  subsidiary  companies.  A  portion 
of  these  expenditures  was  now  permanently  financed  by  the 
issue  of  250,000  shares  of  7  percent  Preferred  stock  at 
$120,  the  marketing  of  the  issue  being  taken  over  by 
J.  P.  Morgan  &  Company.  Both  the  premium  paid  and  the 
favorable  rate  at  which  the  famous  Morgan  house  under- 
took their  distribution  reflected  the  Corporation's  favor- 
able financial  position. 

From  earnings  of  1927  more  than  $90,000,000  was  re- 
invested in  the  business.  Cash  dividends  on  the  Common 
stock  reached  a  new  high  at  $134,836,081,  $8  being  paid 
on  the  old  no  par  stock  through  the  medium  of  three 
quarterly  $2  dividends  and  an  extra  of  $2  on  July  5th.  An 
initial  quarterly  dividend  of  $1.25  on  the  new  $25  par 
Common  was  paid  on  December  I2th  with  an  extra  of  $2.50 
on  January  3,  1928.  This  was  the  equivalent  of  $15.50  on 
the  old  no  par  stock  which  closed  its  extraordinary  market 
history  on  October  8,  1927,  with  a  high  record  of  282%, 
after  being  quoted  four  years  earlier  at  55%.  Since  the 
number  of  shares  had  been  doubled,  the  market  price  of 
new  stock  was  reduced,  but  during  the  next  three  years  ran 
from  a  low  of  1231/2  to  a  high  of  224^. 

In  1928  when  the  American  motor-car  industry  as  a 
whole  reached  the  new  high  of  4,601,141  units  in  produc- 
tion, General  Motors  sold  1,810,806  cars  and  trucks.  Total 
sales  were  $1,459,762,906  and  net  income  available  for 
dividends  $276,468,108,  the  highest  in  the  Corporation's 
history.  Its  percentage  of  the  total  passenger  car  business 
was  41.4.  Dividends  reached  an  all-time  high,  with  a  dis- 
bursement of  $165,300,002  on  Common  stock,  and  more 

The  Stockholder  Interest  355 

than  $100,000,000 — the  largest  sum  to  date — was  rein- 
vested in  the  business.  The  stock  reflected  these  tremendous 
earnings  and  disbursements  by  reaching  a  new  high  of  224^4. 

As  prices  in  that  elevated  range  were  rather  beyond  the 
reach  of  small  investors  whom  the  Corporation  desired  to 
attract,  stockholders  were  asked  to  approve  an  amendment 
to  the  certificate  of  incorporation  effecting  the  exchange  of 
their  $25  par  stock  for  a  new  issue  with  a  par  value  of  $10, 
thus  increasing  the  number  of  outstanding  shares  two  and 
one  half  times.  This  was  done  on  December  10,  1928,  the 
exchange  of  stock  beginning  on  the  January  yth  follow- 
ing. On  the  completion  of  the  exchange,  the  Common  stock 
outstanding  was  43,500,000  shares  of  $10  par  value  and 
no  further  change  has  been  made.  The  highest  quotation 
on  these  shares  was  91  J4  m  1929. 

The  year  1929,  indeed,  recorded  new  highs  in  many 
aspects  of  the  Corporation's  activities.  In  that  year  the 
Corporation  made  these  records: 

Unit  Sales  1,899,267  passenger  and  commercial  cars 

Sold  $1,504,404,472  worth  of  merchandise 

Earned  $248,282,268  available  for  dividends 

Paid  $156,600,007  in  dividends  on  Common  stock 

to  198,600  stockholders 

Reinvested  $82,203,580  in  the  business 

Pay  Roll  $389,517,783 

Employees  233,286 

Bonuses  167,378  shares  of  Common  stock 

Its  employees  had    $56,560,310  balance  in  the  Employes'  Savings 

Funds,  and 

$38,762,678  balance  in  the  Employes'  Invest- 
ment Funds 

Its  car  divisions  made  unit  sales  to  dealers  as  follows: 

Buick,  199,414;  Cadillac,  15,416;  La  Salle,  21,498;  Chevrolet, 
988,191    passenger   cars   and    344,963   commercial   cars;    Pontiac 

356  The  Turning  Wheel 

(Oakland),  224,448;  Oldsmobile,  99,435.  Including  all  cars  and 
trucks,  total  unit  sales  were: 

Passenger  cars 1,554,304 

Commercial  cars 344,963 

Total  unit  sales 1,899,267 

From  1930  to  1933  the  Corporation's  record  was  one 
of  meeting  adverse  circumstances  as  effectively  as  possible, 
maintaining  a  strong  cash  position  in  the  face  of  shrinking 
volume  and,  through  improvements  in  the  design  and 
workmanship  of  its  products,  striving  to  stimulate  consumer 
interest.  Declines,  sharp  when  compared  with  the  figures  of 
1922-30,  appeared  in  sales  and  earnings.  The  latter  years, 
however,  do  reflect  a  rise  in  the  percentage  of  the  total 
automotive  trade  enjoyed  by  the  Corporation. 

Also  in  gratifying  contrast  to  declining  sales,  was  the 
rise  in  the  number  of  stockholders  in  the  Corporation.  The 
year  1929  witnessed  a  notable  increase  in  stockholders,  the 
number  rising  from  71,185  in  the  last  quarter  of  1928  to 
198,600  in  the  last  quarter  of  1929.  Since  then  the  gains 
have  been  large.  The  figures  for  the  last  quarters  of  the 
past  four  years  are: 

1930 263,528  stockholders 

1931 313,117  stockholders 

1932 365,985  stockholders 

1933 351,761  stockholders 

The  rise  may  be  explained  partly  by  the  Corporation's 
strong  cash  position,  the  evident  determination  to  maintain 
it,  and  the  policy  of  paying  out  of  surplus  such  dividends  as 
did  not  threaten  that  position.  Large  blocks  of  stock  became 
broken  up  under  the  financial  pressure  of  the  period  and 
passed  into  small  and  scattered  holdings. 

By  rigid  economy  the  Corporation  has  escaped  record- 
ing a  loss  from  operations.  Although  margin  of  profit  de- 
clined, cash  and  cash  investments  increased,  reduction  of 
inventories  accounting  largely  for  this  increase  in  cash. 
Decisively  the  Corporation  grappled  with  the  problem  of 
readjusting  its  idle  real  estate,  plant  and  equipment  account 
to  salvage  value,  thereby  eliminating  the  need  for  charging 

The  Stockholder  Interest  357 

depreciation  against  this  property.  Consequently,  the  annual 
depreciation  charge  is  reduced  by  some  $7,000,000  a  year. 

The  Corporation's  forecasting  experience  stood  it  in  good 
stead  as  was  shown  fairly  early  in  the  depression,  when 
the  necessary  steps  in  retrenchment  were  taken  and  produc- 
tion was  effectively  controlled. 

On  May  26,  1930,  the  stockholders,  to  simplify  its  senior 
security  structure,  voted  to  replace  outstanding  senior  securi- 
ties by  a  new  $5  series  Preferred  stock,  exchangeable  on 
the  basis  of  1.35  shares  of  the  new  $5  Preferred  for  each 
share  of  the  7  percent  Preferred,  1.15  shares  for  each 
share  of  6  percent  Debenture  stock,  and  shares  for 
each  share  of  6  percent  Preferred  stock.  General  Motors 
enjoys  the  unique  record  in  the  twenty-five  years  of  its 
existence  of  never  having  passed  a  dividend  on  any  of  its 
senior  securities,  of  which  1,875,366  shares  of  its  $5  Pre- 
ferred stock  are  all  that  are  presently  outstanding. 

As  the  business  skies  began  to  clear  in  the  spring  of  1933, 
elements  of  strength  at  once  appeared.  Stocks  of  cars  were 
so  low  that  even  a  limited  new  demand  caused  factory 
activity.  For  the  first  time  in  the  history  of  the  Corpora- 
tion, June  sales  exceeded  May  sales,  and  the  period  of  brisk 
summer  buying  continued  longer  than  usual.  Moreover,  by 
maintaining  dividends  to  an  ever  increasing  body  of  stock- 
holders, without  sacrifice  of  internal  strength,  the  Corpora- 
tion had  commended  itself  to  a  large  and  important  public. 
The  essential  soundness  of  its  management  and  the  solidity 
of  its  financial  position  had  been  demonstrated  under  the 
most  severe  financial  strain  ever  experienced  by  modern 

Buick  on  steps  of  Summit  House,  Pike's  Peak,  1913.  First  car  to 
climb  the  mountain  entirely  on  its  own  power 


Chapter   XXVI 

J7  ROM  its  birth  the  automobile  has  been  a  public  spectacle, 
a  self-advertising  piece  of  merchandise,  performing  in  the 
gaze  of  all.  Whenever  a  new  car  took  the  road  in  the  old 
days,  a  crowd  gathered  to  praise  or  criticize.  Even  yet  a 
new  model  at  the  curb  attracts  passers-by.  Thousands  pay 
admission  to  automobile  shows,  and  changes  in  design  in 
well-known  makes  are  accepted  by  press  and  public  as  out- 
standing news.  But  even  so,  automobiles  have  to  be  sold; 
the  salesman  has  to  get  his  order  signed. 

Old-timers  say  that  for  the  first  fifteen  or  twenty  years 
of  this  century,  automobiles  sold  themselves.  That  is  true 
only  in  the  sense  that  fewer  cars  were  being  built  than  the 
public  was  ready  to  buy.  Nevertheless,  there  were  sales 
problems.  One  was  the  early  timidity  of  the  public;  an  in- 
dividual might  want  to  buy  and  be  quite  able  to  buy,  but  his 
fears  had  to  be  overcome.  Would  the  car  run,  and  could 
he  operate  it?  In  such  cases,  salesmanship  was  largely  a 
matter  of  demonstration.  The  salesman  took  his  prospect 
for  a  ride,  selecting  a  course  on  which  excellencies  would 
show  and  faults  be  overlooked.  If  the  car  was  a  good  hill- 
climber,  hills  would  be  negotiated;  otherwise  the  talk  would 
be  of  speed  on  level  stretches.  With  cars  of  substantial 
reputation,  like  Buick,  demonstrating  the  car  remained  the 
central  effort  down  to  about  1918.  Once  the  car  had  been 
demonstrated  successfully,  the  prospect  paid  a  deposit  and 
the  dealer  entered  his  name  on  a  waiting-list  for  future  de- 
livery. Many  buyers  were  willing  to  pay  premiums  for  early 


360  The  Turning  Wheel 

But  even  in  those  years  the  manufacturer  had  his  selling 
problems.  First  in  the  quantity  field,  R.  E.  Olds  had  to  meet 
the  problem  of  credit  sales.  Nearly  everything  hitherto 
manufactured  for  the  public  and  sold  through  middlemen 
had  been  purchased  on  credit.  Retailers  did  business  partly 
on  the  capital  of  manufacturers  and  wholesalers,  and  in  turn 
sold  to  many  of  their  customers  on  open  account.  There 
were  special  reasons  why  this  practice  could  not  be  fol- 
lowed with  regard  to  automobiles.  Manufacturers  could  not 
find  capital  enough  to  finance  their  trade  on  that  basis.  Each 
unit  represented  so  much  money  that  credit  risks  could 
hardly  be  taken.  Cars  depreciated  rapidly  in  use,  and  at  the 
start  could  hardly  be  considered  as  dependable,  standard- 
ized merchandise.  Consequently,  Mr.  Olds  insisted  upon 
shipping  with  sight  draft  attached  to  bill  of  lading,  a  cash 
transaction  as  far  as  the  factory  was  concerned,  since  banks 
would  finance  goods  in  transit  upon  bona  fide  orders.  That 
practice  has  been  generally  followed,  though  liberalized,  as 
will  be  described  later. 

Under  this  system  the  dealer  had  to  furnish  all  the  capi- 
tal and  credit  required  to  stock  the  car  pending  sale,  and 
finance  his  deals.  If  a  man  of  some  means  and  substance,  he 
could  usually  use  local  bank  capital  to  pay  his  drafts  and 
take  over  his  cars  from  the  railroad,  but  in  many  places 
banking  facilities  were  meager,  and  bankers  timid.  So  the 
manufacturer  had  to  choose  his  dealers  with  an  eye  to  their 
general  credit  as  well  as  their  selling  ability.  The  seasonal 
character  of  the  business  made  the  dealer's  ability  to  finance 
in  advance  of  sale  highly  important  to  the  manufacturer. 
March,  April,  May,  and  June  were  the  best  months  for 
deliveries,  but  with  limited  facilities  for  manufacture,  pro- 
duction had  to  proceed  at  a  steadier  pace.  Unless  the 
waiting-list  was  extra  long,  the  factory  could  operate 
profitably  only  if  dealers  had  credit  enough  to  take  cars  in 
the  winter  months  for  storage  in  a  reasonable  quantity.  In 
a  vast  marketing  area  like  the  United  States,  the  inability 
of  even  10  percent  of  the  dealers  to  do  this  might  be  em- 
barrassing. Therefore,  although  cash  was  the  rule,  credit 
qualifications  had  to  be  considered  by  the  manufacturer. 

Marketing  the  Motor  Car  361 

Various  efforts  were  made  to  take  short  cuts  to  the 
market  when  not  enough  strong  dealers  could  be  found  to 
give  a  manufacturer  adequate  representation  in  all  sections. 
The  factory  branch  store  was  one  method  which  has  been 
tried  by  nearly  every  leading  manufacturer.  At  one  time 
Chevrolet  had  over  fifty  of  these  stores,  but  found  it  ad- 
visable to  abandon  all  but  a  few.  The  Buick  branch  in  New 
York  City  outlived  all  its  comrades.  Also,  distributorships 
were  set  up  for  large  territories,  a  natural  evolution  in  view 
of  the  time  involved  in  rounding  out  a  system  of  national 
representation  on  the  basis  of  contracts  with  individual 
dealers.  Some  manufacturers  operated  sales  zones  on  their 
own  account;  others  allocated  territories  to  independent 
individuals  and  firms.  Some  of  the  latter  have  been  highly 
influential  in  the  history  of  General  Motors.  An  excellent 
example  is  Harry  K.  Noyes  of  Boston,  Buick  branch  man- 
ager and  distributor  for  New  England  for  more  than 
twenty-five  years.  In  several  other  parts  of  the  country  con- 
tinuity records  of  almost  equal  impressiveness  have  been 
made.  Successful  distributors  often  reinvested  their  profits 
with  their  dealer-customers,  acquiring  part  ownership,  and 
in  some  cases  full  ownership  of  important  retail  outlets  in 
their  territory. 

In  a  trade  of  rapid  growth  and  immense  vitality,  dealer 
arrangements  are  necessarily  flexible,  adjusting  themselves 
to  the  needs  of  the  territory  and  the  business  and  financial 
capacity  of  the  dealers.  Hence  sales  policies  which  were  too 
rigid  to  let  the  human  element  expand  and  flourish  on  the 
local  side  have  usually  come  to  grief.  One  of  the  early  prob- 
lems was  to  find  and  secure  as  dealers  and  distributors  men 
who  would  keep  on  growing  as  the  industry  grew. 

Despite  the  policy  on  the  manufacturer's  part  to  con- 
tract with  substantial  parties,  the  early  dealers  were  usually 
men  of  more  courage  than  capital.  They  had  to  be  cour- 
ageous, since  they  were  staking  everything  on  their  faith  in 
a  new  business  geared  to  a  scale  of  values  beyond  anything 
else  ever  taken  to  the  market  in  quantity.  In  1908  a  good 
automobile  cost  as  much  as  a  small  house;  the  difference  was 
that  banks,  building  and  loan  associations,  and  mortgage 
companies  were  solidly  behind  real  estate,  while  the 

362  The  Turning  Wheel 

automobile  dealer  had  to  finance  his  operations  on  his  own 
responsibility.  At  the  start  he  usually  operated  "on  a  shoe- 
string," until  profits  gave  him  a  firmer  base  and  longer  line  of 
credit.  As  a  result,  the  survivors  of  these  adventurous  begin- 
nings, now  well  along  in  years,  still  have  the  hearty  air  of  men 
who  in  their  youth  grappled  gayly  with  fortune,  taking  good 
luck  with  a  grin  and  bad  luck  with  a  smile.  They  fought  for 
public  acceptance  of  the  automobile ;  upon  their  ability  to  con- 
vince all  classes  of  buyers  the  new  industry  depended  for  the 
introduction  of  its  products  into  areas  as  yet  unprepared  for 
it  by  advertising,  good  roads,  or  service  facilities. 

In  New  England  Harry  K.  Noyes  would  break  a  trail 
over  a  mountain,  sell  his  car,  establish  a  dealer,  and  make 
his  way  back  to  the  railroad  in  an  ox  cart.  In  Minnesota, 
Harry  Pence  would  lead  a  string  of  Buicks  westward 
through  the  mud  and  never  think  of  returning  until  the  last 
one  had  been  sold.  He  might  take  wheat  or  potatoes  in 
trade,  but  he  sold  the  caravan  and  returned  to  Minneapolis 
for  more.  As  one  veteran  said : 

We  were  business  buccaneers  on  uncharted  seas;  we  would  gamble 
with  anything  except  the  good  name  and  fame  of  the  cars  we  were 
selling.  I  have  risked  my  life  more  than  once  making  demonstra- 
tions on  hill  roads  and  hairpin  curves  that  I  had  never  seen  before. 
There  wasn't  the  same  uniformity  in  cars  that  there  is  now,  and 
because  one  performed  well  that  was  no  guarantee  that  the  next  one 
would.  If  it  failed  and  we  survived,  we  always  had  plenty  of 
reasonable  explanations  on  tap,  made  repairs  at  the  nearest  black- 
smith shop  and  returned  for  another  try.  I  made  it  a  point  of  honor 
for  years  never  to  let  go  of  a  man  who  seemed  to  me  to  be  the 
best  dealer  material  in  his  community.  Sometimes  I  had  to  wait 
years  to  get  him,  taking  someone  else  in  the  meantime.  But  if  the 
second  choice  didn't  make  good  after  giving  him  every  chance  and 
encouragement,  back  I  would  be  after  number  one. 

We  didn't  know  so  much  about  General  Motors  then.  We  were 
Buick  men  or  Cadillac  men  or  Oldsmobile  men,  whatever  the 
hook-up.  That  is  still  pretty  much  true  in  the  field,  but  then  we 
were  treading  on  each  other's  toes  all  along  the  line,  since  less 
attention  was  paid  then  to  keeping  General  Motors  cars  out  of 
direct  price  competition  with  one  another.  That  was  just  as  well, 
for  it  kept  us  on  our  mettle  at  a  time  when  our  futures  depended 

Marketing  the  Motor  Car  363 

upon  building  the  best  dealer  organizations  possible,  and  our 
dealers  likewise  needed  to  reach  and  cultivate  the  best  clientele  in 
their  neighborhoods.  Later  on,  when  our  expenses  of  doing  business 
were  larger,  and  the  market  was  less  demanding,  we  welcomed  the 
effort  of  headquarters  to  keep  General  Motors  cars  in  price  classi- 
fications where  competition  between  them  became  marginal  rather 
than  general. 

The  first  motor  cars  were  offered  to  the  public  without 
top,  windshield  or  lamps,  and  were  serviced  by  black- 
smiths or  buggy  builders.  Dealers  had  to  stock  necessary 
equipment,  create  service  organizations,  and  organize 
supply  stations.  A  pioneer  salesman  invading  new  territory 
made  it  his  business  to  talk  country  storekeepers  into  stock- 
ing gasoline,  and  to  urge  upon  the  livery-stable  keeper  the 
wisdom  of  providing  accommodations  for  motor  cars  as 
well  as  for  horses  and  carriages. 

Fairs  bulked  large  in  the  early  sales  efforts.  The  first 
motor  cars  were  denied  admittance  to  these  gatherings,  but 
that  prohibition  soon  passed,  and  presently  whole  buildings 
came  to  be  set  aside  for  automobile  displays.  To  Bar- 
num  &  Bailey  goes  credit  for  breaking  down  the  barrier 
against  automobile  showmanship  in  many  backward  parts 
of  the  country.  During  the  entire  1896  season,  Barnum  & 
Bailey  street  parades  were  led  by  an  automobile,  and  the 
public  applauded  its  appearance  in  the  ring  twice  daily. 

Within  a  few  years  the  automobile  industry  would  be 
putting  on  its  own  shows  or  fairs  in  all  the  large  centers. 
As  the  trade  developed,  this  practice  spread  downward  until 
the  automobile  show  has  become  an  annual  feature  in  most 
county-seat  towns.  New  York  and  Boston  led  off  with  auto- 
mobile shows  in  1900,  following  the  precedents  set  by 
annual  cycle  shows.  In  showmanship,  as  well  as  in  mechanics, 
the  automobile  trade  owes  a  considerable  part  of  its  early 
momentum  to  the  bicycle  trade.  By  an  easy  transition  firms 
making  bicycles  and  bicycle  parts  began  to  make  automo- 
biles and  parts.  One  of  General  Motors'  chief  accessory 
producers — New  Departure — began  its  industrial  career 
making  doorbells  and  bicycle  bells ;  then  it  passed  to  coaster- 
brakes  and  latterly  to  ball  bearings.  Another  started  with 

364  The  Turning  Wheel 

bicycle  gears.  Hundreds  of  the  most  effective  of  the  early 
automobile  salesmen  came  directly  into  the  new  field  from 
the  bicycle  trades;  it  was  a  commonplace  to  see  an  auto- 
mobile in  one  show  window  of  a  store  while  the  other 
window  continued  to  display  bicycles.  And,  of  course,  the 
"bicycle  craze"  of  the  early  'nineties  brought  the  public 
around  to  the  automobile  as  the  next  step  in  highway  travel 
and  rapid  movement. 

The  bicycle  craze  was  fast  and  furious  while  it  lasted. 
It  began  with  velocipedes  and  high-wheel  boneshakers,  and 
ran  rapidly  through  to  the  "safety"  and  elaborate  multiple 
cycles.  Chief  of  these  was  the  tandem,  now  remembered 
chiefly  as  "the  bicycle  built  for  two"  of  the  famous  "Daisy 
Bell"  song.  Those  were  the  days  of  famous  bicycle  racers, 
of  Tom  Cooper,  Eddie  Bald,  Harry  Elkes,  and  Jimmie 
Michaels,  paced  by  three-,  four-,  five-,  and  six-man  machines. 
Probably  the  largest  cycle  ever  built  was  a  ten-seater  upon 
which  Boston  belles  used  to  take  the  air  to  the  wonder  and 
applause  of  pedestrians.  To  meet  the  demand  for  bicycles, 
some  of  America's  most  famous  precision  manufacturers — 
the  sewing  machine  and  firearms  makers — turned  part  of 
their  plants  into  production  of  cycles  and  parts,  and  so  pre- 
pared themselves  for  similar  attention  to  the  coming  auto- 
mobile needs. 

The  swift  rise  and  fall  of  the  bicycle  business  caused 
many  bankruptcies  which  prejudiced  investors  and  bankers 
against  the  motor-car  industry  from  the  start.  This  preju- 
dice remained  active  for  years  and  had  its  influence  on  the 
early  history  of  General  Motors.  When  the  then  young 
Company  needed  capital  in  1910  the  old  refrain  was  still 
being  chanted,  "See  what  happened  to  the  'bicycle  craze.'  ' 
The  automobile  business  had  to  live  down  the  difficulties 
of  its  predecessor. 

Other  established  businesses  which  furnished  large  quotas 
of  dealers  and  salesmen  for  the  new  automobile  trade  were 
the  carriage  and  farm  implement  trades.  The  carriage 
trades,  indeed,  had  developed  the  distributorship  angle  of 
vehicle  selling  before  the  automobile  entered  the  American 
scene  in  quantity;  in  placing  Buick  distribution  on  that 

Marketing  the  Motor  Car  365 

basis,  Mr.  Durant  followed  time-tested  precedents  at  the 
outset,  and  of  course  improved  on  them,  building  by  that 
means  a  staunch  and  comprehensive  selling  organization 
covering  the  whole  country.  The  West,  with  its  magnificent 
distances,  especially  required  to  be  handled  in  this  way,  in 
great  blocks  rather  than  piecemeal,  and  Mr.  Durant's  early 
success  there  may  be  counted  as  chiefly  responsible  for  his 
pushing  Buick  into  first  place  in  sales  volume  by  1908. 

The  "saturation  point,"  one  of  the  major  delusions  of  the 
early  period,  kept  conveniently  receding  as  each  year 
brought  larger  and  larger  sales.  Prophets  of  doom  were 
always  talking  about  the  mythical  point  where  everyone 
would  have  all  the  motor  cars  he  wanted.  This  opinion  was 
based  upon  carriage  and  bicycle  precedents  and  its  disciples 
quite  overlooked  the  fact  that  the  automobile  was  an 
unprecedented  development.  Everyone  wants  a  new  motor 
car;  production  is  limited  only  by  buying  power.  Owners  of 
bicycles  and  carriages  were  less  keen  for  new  bicycles  and 
new  carriages;  and,  in  addition,  persons  who  had  never 
possessed  earlier  modes  of  transport  came  eagerly  into  the 
automobile  market.  So  the  "saturation  point"  remained  in 
the  realm  of  rhetoric  for  many  years. 


The  big  business  of  showing  automobiles  has  developed 
new  features  of  late.  Dealers  in  the  larger  centers  present 
what  may  be  considered  perpetual  shows  of  all  models  in 
handsome  showrooms.  "Automobile  Row"  is  usually  the 
brightest  spot  in  a  city's  mercantile  section,  though  the 
tendency  of  dealers  to  herd  together  is  perhaps  a  little  less 
marked  than  it  was.  Nearly  every  sizable  city  now  has  its 
annual  show  in  the  late  winter  or  early  spring,  with  New 
York  for  years  starting  the  schedule  early  in  January.  The 
New  York  show  has  grown  steadily  in  color  and  popu- 
larity, drawing  attendance  from  all  parts  of  the  country, 
and  being  always  well  patronized  by  a  public  willing  to  pay 
to  view  the  new  models. 

In  1932,  from  April  2d  to  9th,  General  Motors  held 
national  exhibitions  of  its  products  simultaneously  in  the 


The  Turning  Wheel 

following  fifty-five  cities,  located  in  thirty  states  and  the 
District  of  Columbia : 

Albany,  New  York 
Atlanta,  Georgia 
Baltimore,  Maryland 
Billings,  Montana 
Birmingham,  Alabama 
Boston,  Massachusetts 
Brooklyn,  New  York 
Buffalo,  New  York 
Butte,  Montana 
Charleston,  West  Virginia 
Charlotte,  North  Carolina 
Chicago,  Illinois 
Cincinnati,  Ohio 
Cleveland,  Ohio 
Columbus,  Ohio 
Dallas,  Texas 
Davenport,  Iowa 

Dayton,  Ohio 
Denver,  Colorado 
Des  Moines,  Iowa 
Detroit,  Michigan 
El  Paso,  Texas 
Grand  Rapids,  Michigan 
Houston,  Texas 
Indianapolis,  Indiana 
Jacksonville,  Florida 
Kansas  City,  Missouri 
Los  Angeles,  California 
Louisville,  Kentucky 
Memphis,  Tennessee 
Milwaukee,  Wisconsin 
Minneapolis,  Minnesota 
Nashville,  Tennessee 

Night  Scene:  General  Motors  Building  at  the  Century  of  Progress 
Exposition,  Chicago,  1933 

Marketing  the  Motor  Car  367 

New  Haven,  Connecticut  St.  Louis,  Missouri 

New  Orleans,  Louisiana  St.  Paul,  Minnesota 

New  York,  New  York  San  Antonio,  Texas 

Newark,  New  Jersey  San  Francisco,  California 

Oakland,  California  Seattle,  Washington 

Oklahoma  City,  Oklahoma  Spokane,  Washington 

Omaha,  Nebraska  Springfield,  Massachusetts 

Philadelphia,  Pennsylvania  Syracuse,  New  York 

Pittsburgh,  Pennsylvania  Toledo,  Ohio 

Portland,  Oregon  Tulsa,  Oklahoma 

Rochester,  New  York  Washington,  D.  C. 

There  was  also  a  special  showing  in  connection  with  the 
General  Motors  exhibit  at  Atlantic  City.  This  nation-wide 
selling  effort  received  favorable  publicity  as  the  most  de- 
termined effort  made  by  any  corporation  to  revive  buying. 
The  trade  of  approximately  2,000  of  the  largest  and 
strongest  General  Motors  dealers  located  in  metropolitan 
areas  was  directly  affected  by  the  exhibits,  and  about  18,000 
dealers  benefited  by  the  advertising  and  sales  promotion 
campaigns.  In  Boston  alone  240,000  persons,  by  actual 
count,  visited  the  six-day  Exposition  with  no  other  attrac- 
tion than  General  Motors  products. 

General  Motors  products  are  displayed  at  all  leading 
automobile  shows  in  America  and  elsewhere,  except  in  those 
foreign  shows  restricted  to  national  products.  In  the  case  of 
the  Chicago  and  New  York  shows,  special  General  Motors 
exhibits  are  held  during  the  period,  the  Hotel  Astor  in  New 
York  City  and  the  Stevens  Hotel  in  Chicago  being  the 
usual  locations.  In  1932  and  1933,  the  New  York  General 
Motors  special  showing  was  moved  to  the  Waldorf-Astoria. 


All  the  Corporation's  price  calculations  come  under  re- 
view in  a  competitive  market,  which  is  the  court  of  last 
resort,  so  that  dealer  welfare  cannot  be  the  only  yardstick 
in  fixing  prices.  The  industry  as  a  whole  strains  for  reduced 
costs  as  the  basis  of  appeal  to  the  customer's  desire  and 
pocketbook.  With  the  increase  in  manufacturing  efficiency, 

368  The  Turning  Wheel 

General  Motors  has  followed  the  plan  of  building  more 
value  into  its  cars  year  by  year,  adding  to  low-priced  cars 
the  features  introduced  on  higher-priced  cars.  But  there 
are  evidently  limits  to  this  evolution,  and  the  new  Stand- 
ard Chevrolet,  with  several  features  of  the  Master  Chev- 
rolet omitted,  was  a  move  toward  a  lower  price  level. 

How  much  further  manufacturers  can  go  in  this  direc- 
tion depends  upon  many  factors,  but  obviously  they  cannot 
go  on  indefinitely  without  reaching  such  a  point  that  cheap- 
ness fails  to  include  the  essentials  of  safety  and  de- 
pendability to  which  the  public  has  become  accustomed.  In 
the  meantime,  the  higher-priced  cars  tend  to  come  down  the 
price  scale,  partly  through  economies  in  production,  partly 
through  the  introduction  of  smaller  models  bearing  names 
which  have  achieved  a  reputation  at  high  levels.  Altogether 
the  problem  of  price  setting  is  one  of  many  complications 
and  cross-currents  upon  which  the  Corporation  concentrates 
full  attention,  seeking  to  find  each  year  a  solution  satisfac- 
tory alike  to  its  customers,  its  dealers,  and  its  stockholders. 
At  best  its  decision  must  always  be  a  compromise  arrived 
at  after  considering  all  these  interests. 

The  darker  the  night  the  brighter  shines  the  light.  There 
have  been  times  in  General  Motors  history  when  business 
rolled  in  with  comparatively  little  sales  and  advertising 
effort,  when  the  cry  was  for  more  cars  in  a  seller's  market, 
and  the  public  took  eagerly  whatever  was  produced.  These 
halcyon  days  had  their  satisfactions,  of  course,  but  they  also 
had  their  disadvantages.  Temptation  reigned  then  to  let 
well  enough  alone,  to  delay  factory  changes,  and  innova- 
tions in  design.  Under  the  stern  challenge  of  depression 
General  Motors  has  revised  its  processes  in  the  interests  of 
economy  and  efficiency,  and  its  major  products  have  been 
rigidly  scrutinized  in  order  to  increase  their  appeal  in  a 
buyer's  market,  which  demanded  not  only  lower  prices,  but 
also  higher  quality  and  better  workmanship. 

In  the  United  States  the  total  number  of  automobile 
dealers  has  been  decreasing  steadily,  due  partly  to  decline  in 
the  number  of  manufacturers,  and  partly  to  the  growth  of 
combination  dealerships,  in  which  one  firm  handles  two  or 
more  lines.  The  number  of  dealers  declined  from  50,868  in 

Marketing  the  Motor  Car  369 

1926  to  38,092  at  the  end  of  1932.  Exclusive  dealership 
suffered  heavily,  while  multiple-line  dealerships  increased 
44  percent  from  1926  to  1932. 

One  third  of  all  dealers  in  1932  handled  more  than  one 
line  of  cars,  while  seven  years  earlier  less  than  one  fifth  did 
so.  In  many  localities  General  Motors  contributed  to  this 
changing  status  by  teaming  Oldsmobile  and  Cadillac  to- 
gether, and  Buick  and  Pontiac,  a  selling  program  facili- 
tated by  the  temporary  organization  of  the  B-O-P  Sales 
Company  in  1932,  (discontinued  1933).  In  1932,  Buick 
dealers  handling  only  Buick  cars  decreased  by  26  percent, 
while  those  handling  one  or  more  additional  lines  increased 
by  24  percent.  Pontiac  and  Oldsmobile  moved  in  a  similar 
direction,  but  to  a  less  degree.  B-O-P  in  September,  1933, 
announced  6,883  direct  dealer  outlets,  the  largest  number 
in  five  years — divided  as  follows — Buick,  2,105;  Olds- 
mobile,  2,448;  Pontiac,  2,330. 

Of  the  53,437  passenger  car  representations  reported 
by  Automotive  Industries  as  in  business  at  the  close  of  1932, 
General  Motors  passenger  car  divisions  were  credited  with 
16,000,  or  a  little  less  than  30  percent  of  the  total  for  the 
entire  industry. 

In  the  beginning  automobile  makers  were  financially 
assisted  by  their  suppliers  and  their  distributors.  The  for- 
mer sold  their  goods  on  liberal  datings,  the  latter  made 
large  deposits  in  advance.  With  these  aids  the  manufacturer 
managed  to  produce  a  large  volume  on  small  working 
capital.  Both  the  dealers  and  supply  men  were  naturally 
consulted  in  planning  a  new  model.  Gradually,  as  engi- 
neering advanced  and  manufacturing  companies  came  into 
large  capital  and  controlled  more  of  their  supplies,  the  auto- 
mobile makers  advanced  toward  uniform  control  of  dis- 
tribution. Their  contracts  usually  contained  a  thirty-day  can- 
cellation clause:  in  a  "seller's  market,"  with  dealerships  in 
demand,  this  clause  was  the  "ace  in  the  hole"  through  pos- 
session of  which  manufacturers  could  impress  their  will  on 
dealers  in  the  direction  of  adequate  servicing,  display,  local 
advertising,  and  many  other  merchandising  activities.  Re- 
pair charges  were  fixed  by  the  factory,  and  at  one  time 
dealer  accounting  was  under  direction. 


The  Turning  Wheel 

In  no  retail  trade  is  the  dealer  so  closely  controlled. 
Mr.  W.  C.  Durant  advertised  one  of  the  early  Chevrolets 
to  dealers  in  these  words:  UA  little  child  can  sell  it."  By 
systematizing  retail  efforts,  and  taking  their  message 
directly  to  the  public  through  advertising,  the  manufac- 
turers are  sometimes  accused  of  reducing  automobile  sales- 
men to  the  status  of  "order  takers."  This  trend,  especially 

Chevrolet  Assembly  Line  at  Century  of  Progress  Exposition, 
Chicago,  1933 

strong  in  the  sales  programs  of  great  quantity  producers  of 
the  industry,  reached  its  height  in  1929.  With  the  develop- 
ment of  a  "buyer's  market"  after  1930,  selling  became  more 
difficult,  and  good  salesmen  were  more  appreciated.  Conse- 
quently, the  stronger  dealers  little  by  little  have  insisted  on 
more  leeway.  Even  though  control  aimed  at,  and  usually 
resulted  in,  better  merchandising  and  higher  dealer  profits, 
human  nature — even  dealer  human  nature — sometimes 
resents  being  "scheduled  and  programmed"  too  openly  and 
too  often.  A  good  deal  depends  on  the  tactfulness  with 

Marketing  the  Motor  Car  371 

which  the  program  is  preserved.  The  new  note  in  automo- 
bile salesmanship,  and  one  which  marks  the  eclipse  of  the 
high-pressure,  mass-campaign  methods,  is  emphasis  on 
manufacturer-customer  relations  based  upon  consumer  re- 
search, and  a  close  study  of  markets. 

Chevrolet  since  the  end  of  1928  has  supplied  more  retail 
outlets  than  any  other  automobile  manufacturer.  Chevrolet 
has  no  distributors,  as  is  the  case  with  nearly  all  manufac- 
turers, but  deals  directly  with  all  its  outlets,  a  situation 
making  for  coordinated  action  in  the  direction  of  a  central 
program.  Chevrolet's  success  in  this  regard  is  one  of  the 
reasons  for  its  great  strides,  but  changing  conditions  of  the 
past  three  years  have  brought  revisions  even  in  Chevrolet's 
selling  plans.  With  the  discontinuance  of  B-O-P  Sales  Com- 
pany, the  direction  of  selling  activities  was  returned  to  the 


No  consideration  of  automobile  marketing  would  be  com- 
plete without  reference  to  used  cars.  The  year  1911  may  be 
considered  as  marking  the  period  in  which  used  cars  began 
to  receive  special  consideration.  In  that  year  the  Glidden- 
Buick  Corporation  was  organized  in  New  York  City  to 
sell  used  cars  taken  in  exchange  by  the  metropolitan  branch, 
the  conclusion  being  reached  that  in  that  area,  at  least,  it 
was  well  to  keep  the  merchandising  of  new  and  used  cars 
in  separate  hands.  Other  areas  operated  on  other  plans. 

In  1914,  or  thereabouts,  used  cars  began  to  accumulate 
to  the  point  of  clogging  trade.  In  that  year  the  Curtis  Pub- 
lishing Company,  after  a  searching  investigation  reported: 

Of  all  the  problems  that  vex  the  automobile  industry,  probably  the 
most  serious  and  difficult  of  solution  is  that  of  the  used  cars.  The 
second-hand  car  problem  is  likely  to  become  more  acute  as  the 
number  of  cars  increases. 

With  the  revival  of  prosperity  the  glut  decreased  some- 
what, and  little  more  was  heard  of  it  until  the  end  of  the 
war.  Then  with  increased  production  of  new  cars  and  the 
strides  taken  in  production  methods,  the  used  car  problem 
began  to  assume  serious  proportions. 

372  The  Turning  Wheel 

The  truth  of  certain  shrewd  observations  which  the 
Curtis  company  had  made  in  its  1914  report  began  to  be 
revealed.  Many  dealers  proved  to  be  better  salesmen  than 
they  were  buyers.  The  truth  is  that  their  buying  experience 
had  been  somewhat  limited,  due  to  the  fact  that  they  took 
their  cars  at  regular  discounts  from  list  prices  fixed  by  the 
manufacturer.  Also,  hosts  of  dealers  were  weak  in  account- 
ing, in  common  with  most  local  merchants.  Many  of  them 
thought  that  when  they  sold  a  used  car  for  $100  less  than 
they  had  allowed  on  a  new  one,  they  were  making  money, 
the  commission  on  the  new  car  being  large  enough  to  take 
up  the  slack.  They  overlooked  the  fact  that  in  all  prob- 
ability they  would  have  to  furnish  some  service  without 
charge,  and  the  overhead  cost  was  often  completely  dis- 
regarded. Dealers  began  to  lose  money  without  knowing 
quite  why,  until  gradually  their  capital  was  either  dissipated 
or  frozen  in  the  form  of  slow-moving  merchandise  on  a 
used  car  lot.  Two  sales  had  to  be  made  to  produce  one 
normal  profit  or,  to  be  accurate,  less  than  one  normal  profit, 
for  interest  and  depreciation  on  cars  carried  over  the 
winter  cost  the  dealer  heavily,  and  each  spring  he  was  likely 
to  find  himself  with  a  carry-over  of  cars  which  had  to  be 
re-priced  downward  because  they  were  a  year  older. 

Destructive  competition  set  in  under  the  name  of  allow- 
ances, one  dealer  bidding  more  than  the  other.  Instead  of 
cutting  the  established  prices  on  new  cars,  dealers  effected 
the  same  result  by  allowing  extravagant  values  on  old  cars, 
throwing  in  tires  and  other  equipment,  and  guaranteeing 
extended  free  service.  The  used  car  surplus  became  the 
cause  of  price-cutting,  direct  or  indirect. 

Counsels  of  perfection,  excellent  advice  to  dealers,  could 
make  small  headway  against  this  condition.  Various  rem- 
edies were  applied  by  the  more  progressive  dealers;  concen- 
trating on  the  problem,  they  began  to  set  up  used  car 
lots,  which  had  the  advantage  of  goodly  space  at  small 
rentals.  They  organized  and  trained  special  staffs  of  sales- 
men and  attendants  to  dispose  of  used  cars.  Manufacturers 
adopted  various  courses  in  assistance.  They  increased  their 
advertising  appropriations  in  an  effort  to  bring  the  buyer 
to  the  dealer  so  convinced  of  a  certain  car's  merit  that  he 

•  Marketing  the  Motor  Car  373 

could  not  be  moved  away  by  competitors  offering  a  little 
more  for  his  old  car.  A  determined  effort  developed  to 
circulate  among  all  dealers  a  fair  price  list  on  used  cars, 
arrived  at  by  expert  calculation  of  depreciation — a 
practice  previously  found  effective  by  progressive  distribu- 
tors. General  Motors  entered  upon  a  study  of  dealership 
costs,  worked  out  comprehensive  accounting  systems  for  its 
dealers  and  installed  them  at  reasonable  expense  through 
the  General  Motors  Management  Service,  Inc.  This  activity 
has  recently  been  discontinued,  the  reason  for  its  existence 
having  passed  largely  through  the  survival,  under  economic 
pressure,  of  those  dealerships  with  sound  accounting  sys- 
tems, competent  staffs,  and  full  reports  from  every  part  of 
their  territories. 

Notwithstanding  all  these  efforts,  used  cars  accumulated 
to  the  point  at  which  manufacturers  began  considering  the 
advisability  of  assisting  dealers  to  clear  the  streets  and  lots 
of  the  more  enduring  and  least  valuable  specimens. 

Chevrolet  was  the  first  to  act,  setting  up  a  Used  Car 
Disposal  Fund,  financed  by  a  specific  levy  against  each  new 
car  manufactured.  From  this  fund  local  dealers  received 
credits  of  $25  each  on  certification  that  cars  had  been  de- 
stroyed. Under  this  plan  approximately  650,000  cars  were 
junked  from  1927  to  1930  inclusive.  Later  the  National 
Automobile  Chamber  of  Commerce  issued  a  re'port  advising 
action  along  this  line,  and  several  other  companies  estab- 
lished financial  incentives  for  junking.  Chevrolet's  disburse- 
ments form  a  total  sum  not  reached  by  any  other  manufac- 
turer. The  idea  of  the  Used  Car  Disposal  Fund  originated 
with  a  Wyoming  dealer  who  advanced  it  in  a  trade  magazine. 

Four  out  of  every  five  sales  of  new  cars  now  involve  a 
trade-in.  With  used  cars  the  percentage  is  lower,  40  to  50 
percent.  The  percentage  of  trade-in  deals  has  been  rising  in 
the  case  of  both  new  cars  and  used  cars  for  several  years, 
but  1931  saw  a  slight  drop  in  trade-ins  of  used  cars.  One 
of  the  chronic  evils  of  the  used  car  business  is  that  to  dis- 
pose of  a  used  car  taken  in  trade  for  a  new  car,  the  dealer 
in  almost  half  his  re-sales  must  take  in  another  and  less 
valuable  used  car  as  part  payment  for  number  one.  Several 

374  The  Turning  Wheel 

deals  may  be  necessary,  each  involving  less  reliable  mer- 
chandise before  the  dealer  can  clear  the  transaction. 

The  partial  paralysis  of  the  market  for  cars  in  the  past 
two  years  brought  almost  complete  stability  at  a  low  level 
of  production,  as  may  be  seen  by  comparing  the  number  of 
cars  scrapped  and  replaced  with  sales  in  the  domestic 
market  in  1931  and  1932.  In  1913  three  out  of  four  sales 
represented  additions  to  the  whole  number  of  motor  cars  in 
use,  while  the  fourth  took  the  place  of  the  car  previously  in 
service.  By  1924  this  ratio  had  dropped  from  three-to-one, 
to  two-to-one;  by  1926  nearly  half  the  cars  produced  went 
into  replacements,  and  in  1927  replacements  accounted  for 
about  three  quarters  of  total  production. 

General  Motors  escaped  almost  entirely  the  pressure 
which  this  situation  exerted  on  the  industry  in  general  in 
1927.  There  were  two  reasons.  One  was  the  partial  sus- 
pension of  Ford  activities  coupled  with  the  rapid  rise  of 
Chevrolet;  the  other  was  the  favorable  reception  of 
the  new  Pontiac,  60,000  more  Pontiacs  having  been  sold  in 
1927  than  in  1926.  These  two  factors  resulted  in  General 
Motors  percentage  of  the  industry's  total  business  rising  to 
42.5  in  1927.  Only  once  has  this  figure  been  exceeded  for  a 
full  year's  business:  in  1931  the  ratio  was  43.3  percent. 

In  1930  the  American  automobile  industry  approached 
a  dead  center,  and  in  1931  it  passed  that  center,  755,000 
fewer  cars  being  produced  than  the  number  scrapped,  re- 
placed, or  kept  in  storage  by  owners.  In  1932  this  situation 
was  even  worse  due  to  the  low  new-car  volume  of  that  year. 
With  practically  no  new  buyers  available,  the  strain  on 
dealers  naturally  became  acute,  but  for  General  Motors 
dealers  it  was  somewhat  relieved  by  the  operations  of  the 
Used  Car  Disposal  Fund,  the  combining  of  sales  representa- 
tions in  many  localities,  and  the  Corporation's  policy  to 
prevent  overloading  dealers  with  cars  for  stock. 


Elsewhere  has  been  related  the  growth  of  control  over 
General  Motors  schedules  in  line  with  regular  reports  of 
dealers'  stocks.  Cars  on  hand,  both  with  the  divisions  and 

Marketing  the  Motor  Car  375 

dealers,  were  at  peak  in  1924.  One  must  go  back  eleven 
years  to  1922,  to  find  as  low  a  stock  of  cars  as  that  of 
1933.  This  reduction  measures  both  the  effectiveness  of  the 
Corporation's  control  program  and  the  desire  of  the  Cor- 
poration to  avoid  pushing  its  dealers  into  difficulties  by  sell- 
ing them  too  many  cars. 

Along  with  a  detailed  program  of  sales  promotion  went  a 
continuing  effort  to  improve  the  financial  status  of  dealers 
wherever  weaknesses  appeared,  the  inquiry  being  pursued 
tactfully,  and  remedies  being  proposed  in  a  spirit  of  coop- 
eration. Of  course,  where  dealers  who  consistently  fell 
below  "bogey" — the  national  average  for  dealers  in  the 
appropriate  price  class — failed  to  avail  themselves  of  the 
advice  and  assistance  offered,  changes  in  representation 
were  made. 

Another  reform  instituted  was  distinctly  in  the  dealer's 
interest.  It  had  been  the  habit,  in  the  early  days  of  the 
industry,  for  dealers  to  contract  with  the  factory  for  a 
year's  requirements,  taking  cars  whenever  the  factory 
shipped  them,  a  fact  which  contributed  to  the  dealers'  over- 
stock of  1924.  The  new  plan,  which  has  been  used  since, 
called  for  firm  orders  from  dealers  for  one  month  in 
advance  and  tentative  orders  for  three  months  in  advance, 
efforts  being  continued  to  turn  the  tentative  orders  pro- 
gressively into  firm  orders.  This  has  had  the  effect  of  reliev- 
ing dealers  of  uncertainty,  and  in  practice  goes  far  to  offset 
the  statements  often  heard  to  the  effect  that  factory  domi- 
nation has  decreased  dealer  initiative.  In  this  vital  matter  of 
control  of  shipments,  dealers  are  freer  and  safer  than  they 
were  ten  years  ago. 

Until  fairly  recently  nearly  all  manufacturers,  with  an 
eye  to  production  totals,  were  disposed  to  crowd  cars  upon 
dealers  in  quantities  likely  to  prove  embarrassing  in  a  fall- 
ing market.  In  the  early  days  of  the  industry  this  was 
necessary,  because  manufacturing  and  storage  facilities  and 
financial  capacities  were  insufficient  to  meet  the  seasonal 
demands  of  spring  and  early  summer.  A  beneficial  change  in 
this  regard  came  with  the  rise  of  closed  cars  to  favor.  At 
present  the  market  takes  approximately  44  percent  of  its 

376  The  Turning  Wheel 

automobiles  in  March,  April,  May,  and  June,  and  the  first 
six  months  of  the  year  develop  60  percent  of  the  annual 
sales.  The  business  is  still  seasonal,  but  slightly  less  so  than 
it  used  to  be.  However,  with  mass  production  methods  to 
the  fore,  the  temptation  arose  to  force  cars  on  dealers  faster 
than  they  could  sell  them,  using  a  "floor  plan"  loan  to 
finance  all  or  part  of  the  transaction.  A  turn  of  the 
economic  pendulum  soon  revealed  the  danger.  Overloaded 
with  new  cars  which  must  be  sold  soon  after  receipt,  a 
dealer  becomes  vulnerable  to  the  point  where  he  must  accept 
at  uneconomic  valuations  more  used  cars  than  he  can  dis- 
pose of  quickly  and  profitably.  After  one  experience  of  this 
nature  General  Motors  has  set  its  face  against  overloading 
dealers,  in  the  confident  belief  that  the  Corporation  should 
not  seek  to  improve  its  position  at  the  expense  of,  or  to  the 
embarrassment  of,  its  dealers,  upon  whose  continued  sol- 
vency and  aggressiveness  so  much  depends. 


Another  effort  of  the  Corporation  to  assist  dealers  goes 
forward  under  the  General  Motors  Holding  Corporation, 
formed  on  June  22,  1929,  to  invest  in  dealerships  where 
more  capital  seemed  to  be  required.  The  Holding  Corpora- 
tion maintains  six  regional  offices:  in  New  York  City, 
Chicago,  San  Francisco,  Dallas,  Atlanta,  and  Detroit.  After 
four  years  of  operations  it  has  invested  Corporation  funds 
in  dealership  companies,  in  circumstances  and  under  con- 
ditions which  seem  at  once  to  safeguard  the  investment  and 
promote  effective  representation. 

Applications  for  the  Holding  Corporation's  cooperation 
come  through  the  sales  offices  of  the  car  divisions  which  base 
their  recommendations  upon  a  careful  investigation  of  the 
dealer's  situation,  character,  and  prospects.  A  check-up  by 
the  Holding  Corporation  is  then  made.  Usually  the  Holding 
Corporation's  capital  is  used  either  to  retire  silent  partner 
interests  and/or  bank  loans,  or  to  increase  facilities  where 
they  seem  inadequate  to  the  potential  market.  Holding 
Corporation  investments  are  not  regarded  as  permanent, 
the  expectation  being  that  the  dealer's  share  of  the  profits 

Marketing  the  Motor  Car  377 

will  retire  the  Holding  Corporation's  investment.  The 
Holding  Corporation  is  regarded  as  operating  a  revolving 
fund  to  be  used  capital-wise  to  improve  sales  representation 
which,  except  for  under-capitalization,  is  healthy  and  well- 
managed.  While  General  Motors'  interest  remains  in  the 
investment,  the  Holding  Corporation  exercises  a  consider- 
able measure  of  control,  and  endeavors  to  reduce  expenses 
and  increase  profits. 


The  special  problem  of  fleet  sales  to  large  users  resulted 
in  the  incorporation  of  General  Motors  Fleet  Sales  Cor- 
poration in  1930.  Deliveries  were  handled  through  dealers, 
under  a  special  contract,  but  Fleet  Sales  Corporation  dealt 
directly  with  national  and  state  governments.  The  fleet 
users'  agreement  applied  only  to  operators  of  at  least  100 
cars  who  agreed  to  buy  a  minimum  of  $20,000  worth  of 
General  Motors  cars  and  trucks  annually. 

In  1933  the  minimum  Fleet  sales  contract  was  reduced 
to  $15,000;  also  dealers  began  to  deal  directly  with  national 
and  state  governments. 

With  the  formation  of  this  corporation,  the  entire  fleet 
activities  of  individual  General  Motors  divisions  were  taken 
over  by  the  General  Motors  Fleet  Sales  Corporation.  This 
consolidated  plan  of  selling  resulted  in  better  sales  coverage 
of  large  national  fleet  users  at  a  lower  sales  cost,  due  to  a 
reduced  total  personnel.  In  addition,  it  made  it  possible 
for  one  General  Motors  organization,  specializing  in  a 
particular  field,  to  sell  the  entire  line  of  cars  and  trucks  to 
the  large  fleet  user,  and  thus  better  fit  General  Motors 
products  to  each  of  the  transportation  needs  of  the  user. 

This  corporation  also  handles  the  sale  of  General  Motors 
cars  and  trucks  to  the  United  States  government,  the  vari- 
ous states,  and  the  District  of  Columbia.  During  1932, 
2,101  General  Motors  cars  and  trucks  were  sold  to  the 
national  government,  for  $1,404,330.  In  the  first  seven 
months  of  1933,  government  awards  to  General  Motors 
totaled  $5,730,634,  representing  11,917  cars  and  trucks. 
This  large  increase  is  principally  due  to  the  Reforestation 


The  Turning  Wheel 

program,  and  the  motorizing  of  certain  sections  of  the  Na- 
tional Guard.  Awarding  of  government  orders  proceeds 
under  strict  competition  both  as  to  price  and  quality,  yet 
General  Motors  secured  78  percent  of  this  business  on  the 
basis  of  units,  and  75  percent  on  the  basis  of  dollar  volume. 
The  outstanding  item  in  1933  government  awards  was 

Dr.  Carlos  C.  Booth,  first  American  physician  to  use  an  automobile 
in  his  practice.  Car  designed  and  assembled  by  himself,  1896 

Even  in  the  automotive  industry  itself,  relatively  few 
persons  comprehend  how  the  fleet  business  has  expanded. 
Within  five  years  General  Motors  divisions  have  sold 
64,339  units  to  232  companies.  Each  of  84  companies  has 
purchased  an  average  of  567  Chevrolets  during  this  period, 
the  heaviest  buyer  taking  3,665  units.  In  the  same  period, 
3,905  General  Motors  trucks  have  gone  to  41  fleet  users, 
the  average  buyer  taking  95.  Truck  business,  including  both 

Marketing  the  Motor  Car  379 

Chevrolet  and  General  Motors  trucks,  runs  at  about  25 
percent  of  total  fleet  sales,  passenger  cars  for  business  pur- 
poses, 75  percent. 

Through  its  studies  of  mass  transportation  problems  and 
the  special  needs  of  large  users,  General  Motors  Fleet 
Sales  Corporation  has  brought  elements  of  strength  into 
dealer  relations  with  the  larger  purchasers  of  automobiles. 

It  has  been  said  that  the  first  automobile  was  bought, 
not  sold.  That  was  probably  true,  also,  of  the  io,oooth 
automobile;  a  demonstration  sufficing  to  convince  the  cus- 
tomer, but  the  car  had  to  be  sold  to  the  dealer.  Today, 
with  dealer  organizations  spanning  the  world,  automobiles 
have  so  increased  in  quality  and  numbers  that  there  must  be 
a  closer  relation  between  output  and  potential  sales,  between 
manufacturer  and  consumer,  between  dealer  welfare  and 
producer's  prosperity.  In  the  enlightened  merchandising  of 
the  future,  the  indirect  approach  based  upon  consumer 
research  and  close  knowledge  of  market  needs  is  likely  to 
replace  the  former  emphasis  on  high-pressure  salesmanship. 

Some  of  the  glamor  of  the  pioneer  days  has  vanished  as 
the  automobile  trade  has  become  established  as  a  huge  and 
stable  business,  operated  on  scientific  lines  with  all  the  safe- 
guards which  can  reasonably  be  set  up  for  the  protec- 
tion of  its  representatives  in  a  freely  competitive  market. 
But  the  marketing  of  automobiles  still  attracts  large  num- 
bers of  keen,  driving  men,  full  of  confidence  that  the  auto- 
mobile will  reward  their  efforts  amply  as  the  years  roll  on. 

Chapter   XXVII 


UTOMOBILES,  as  we  have  seen,  went  from  factory  to 
dealer  on  a  cash  basis  in  the  early  days  of  the  industry,  and 
were  generally  sold  by  the  dealers  for  cash.  Dealers  soon 
discovered,  however,  that  some  excellent  sales  required 
credit,  and  they  began  to  accommodate  purchasers  with 
good  credit  or  satisfactory  records  under  special  circum- 
stances. As  they  found  more  sales  could  be  made  where 
credit  was  available,  the  more  daring  of  them  began  to 
work  out  plans  for  instalment  selling,  getting  a  substantial 
down  payment,  and  holding  title  to  the  car  until  it  had 
been  completely  paid  for.  It  is  said  that  the  first  systematic 
use  of  instalment  selling  in  the  automobile  field  occurred 
in  San  Francisco  in  1913,  but  this  priority  is  disputed  by 
those  aware  of  similar  early  arrangements  elsewhere.  A 
trade  growing  vigorously,  with  so  many  keen,  driving  men 
at  work  over  so  wide  an  area,  was  certain  sooner  or  later 
to  find  ways  of  using  credit  in  large  sums. 

The  basis  of  these  instalment  transactions  was,  of  course, 
the  dealer's  knowledge  and  vital  interest  in  the  collectibility 
of  his  account;  this  element  is  continued  under  the  recourse 
or  full  endorsement  plan  wherein  the  dealer's  responsibility 
remains  behind  the  obligation  until  it  is  paid  in  full. 

There  grew  up,  naturally,  finance  companies  willing  to 
purchase  automobile  paper  from  dealers  at  a  discount 
on  well-sold  and  well-insured  cars.  Bankers  might  not  feel 
able  to  take  automobile  paper  in  quantity,  but  they  were 
quite  willing  to  lend  money  to  sound  finance  companies  so 
that  the  latter  could  do  a  large  volume  of  business  on 


Financing  and  Insuring  the  Buyer     381 

comparatively  small  capital.  In  general,  these  specialized 
finance  companies  prospered,  because  their  differentials  or 
charges  (the  difference  between  the  cash  and  the  time  or 
instalment  purchase  price)  were  relatively  high,  and  the 
risks  comparatively  low.  As  experience  accumulated,  it  ap- 
peared that  a  good,  insured  automobile  in  the  possession 
of  an  honest  man  or  woman,  and  under  the  complete  legal 
protection  with  which  all  states  surround  property  held 
under  lien,  was  a  fairly  safe  investment,  provided  that 
down  payment  and  schedule  of  payments  anticipated  the 
depreciation  of  the  security  in  use. 

The  finance  companies  developed  another  line  of  automo- 
bile investment — that  of  financing  dealers'  stocks.  The  day 
had  passed  in  which  one  sample  car  represented  the  only 
large  investment  the  dealer  had  to  carry.  As  the  factories 
enlarged  their  lines,  the  dealer  could  provide  adequate  rep- 
resentation only  by  showing  each  model  in  its  various  body 
styles.  His  own  capital  and  earnings  were  usually  absorbed 
in  his  growing  business,  providing  more  floor  space  for 
showing  and  stocking  cars,  a  larger  supply  of  parts,  better 
service  facilities,  and  of  course  used  cars  taken  in  trade. 
Arrangements  were  made  for  stocking  new  cars  under  a 
variety  of  agreements  which  were  generally  known  as 
"floor  plans."  When  these  cars  were  sold  for  cash,  the 
liens  on  them  were  quickly  released.  At  first  it  was  neces- 
sary for  the  dealer  to  pay  and  secure  title  to  the  car  before 
he  sold  it  at  retail  on  instalments,  but  as  the  business  de- 
veloped many  transactions  consisted  of  merely  accepting 
the  retail  contract  in  part  or  full  payment  of  the  wholesale 
obligations.  The  dealer,  of  course,  remained  liable  for  all 
unpaid  balances,  so  that  the  finance  company  always  had  as 
security  back  of  the  transaction  the  merchandise  itself  ade- 
quately insured,  the  credit  of  the  purchaser,  and  the  general 
credit  of  the  dealer. 

The  keen  financial  mind  of  John  J.  Raskob  began  to  work 
on  this  financing  problem  shortly  after  he  entered  General 
Motors.  Need  for  a  finance  service  for  the  dealer  as  well  as 
the  retail  purchaser  at  moderate  time-price  differentials,  and 
functioning  uniformly  as  to  policies  and  rules,  was  most 
apparent  and  was  urged  upon  the  Corporation  from  many 

382  The  Turning  Wheel 

quarters.  If  General  Motors  could  set  up  the  machinery  to 
provide  such  service  at  reasonable  profit,  the  result  would 
be  increased  sales,  improved  dealer  earnings,  and  greater 
consumer  satisfaction.  Accordingly,  on  January  29,  1919, 
after  a  thorough  study  of  the  situation,  and  weighing  both 
the  advantages  and  hazards  of  the  innovation,  General 
Motors  Acceptance  Corporation  was  incorporated  under 
the  investment  section  of  the  banking  law  of  the  State  of 
New  York,  with  20,000  shares  of  Common  stock,  $100  par. 
General  Motors  Corporation  bought  this  stock  at  $125  per 
share,  enabling  the  new  subsidiary  to  start  life  with  a  capi- 
tal of  $2,000,000,  and  a  surplus  of  $500,000.  The  Corpora- 
tion's subsequent  purchases  of  GMAC  stock  have  been  at 
that  average  price,  and  the  sums  involved  were  distributed 
between  capital  and  surplus  in  that  proportion. 

GMAC'S  purpose  has  been  condensed  to  this  statement: 

Briefly  the  aims  and  purposes  of  the  Corporation  are  to  assist, 
through  the  proper  application  of  the  credit  function,  in  the  orderly 
distribution  and  sale  of  the  products  of  the  General  Motors  Cor- 
poration in  such  a  manner  as  will  make  for  a  sound  and  healthy 
manufacturing  and  merchandising  condition. 

It  being  foreseen  that  credit  would  inevitably  play  a  most  im- 
portant part  in  the  development  of  the  automobile  market,  it  was 
the  aim  of  General  Motors  Corporation  to  keep  within  its  con- 
trol, to  the  greatest  extent  possible,  every  factor  of  importance  in 
its  development.  At  the  same  time  it  was  understood  that  the  Cor- 
poration (GMAC)  was  to  function  quite  independently  and  be 
free  from  any  pressure  of  expediency  which  might  impair  its  char- 
acter and  purpose,  and  so  defeat  the  very  aims  which  brought  it 
into  existence. 

In  order  to  fulfill  these  functions  the  organizers  of  GMAC 
developed  complete  plans  for  financing  sales  of  General 
Motors  cars  and  products.  It  set  up  also  a  Financial  Sales 
Department,  through  which  the  obligations  of  the  Accep- 
tance Corporation  were  offered  independently  to  banks 
and  investors  throughout  the  country,  thus  creating  a  stable 
source  of  accommodation  through  the  use  of  which  ad- 
ditional business  would  be  possible  beyond  the  extent  of 
GMAC'S  own  capital.  In  this  department  uare  centered  all 

Financing  and  Insuring  the  Buyer    383 

operations  through  which  the  Corporation  (GMAC)  finances 
itself,  including  not  only  its  sales  activities,  which  parallel 
somewhat  the  lines  of  operation  employed  by  commercial 
paper  brokers,  but  all  its  bank  relations  and  day-to-day  bor- 

Under  the  GMAC  wholesale  plan,  General  Motors  dis- 
tributors and  dealers,  after  credit  has  been  established,  may 
purchase  new  passenger  cars,  commercial  vehicles,  and 
other  products  of  the  Corporation  directly  from  the  sales 
Companies  of  General  Motors  by  paying  a  small  amount 
in  cash;  the  balance  as  the  cars  or  products  are  released 
from  trust,  or  at  an  agreed  date  after  shipment.  Merchan- 
dise so  financed  may  be  stored  in  the  dealer's  showroom 
for  display,  in  warehouses  under  the  control  of  the  dealer, 
or  in  public  licensed  warehouses  under  pledge  of  warehouse 

General  Motors  Acceptance  Corporation  retains  title  to 
the  products  financed  until  full  payment  is  made.  The  plan 
provides  that  a  dealer  may  pay  the  amount  due  on  a  car, 
and  secure  immediate  release.  After  release  the  dealer  has 
full  title  to  the  car. 

The  GMAC  wholesale  charge  includes  insurance  protec- 
tion for  the  dealer  for  the  full  laid-down  price  of  the  car 
against  loss  or  damage  arising  through  fire  or  total  theft. 

Under  the  GMAC  retail  plan,  General  Motors  dealers 
are  urged  to  sell  the  products  of  the  Corporation  to  cus- 
tomers in  good  credit  standing  upon  terms  properly  suited 
to  the  purchaser's  income.  The  buyer  pays  a  portion  in  cash, 
and/or  trade-in  (usually  from  30  to  50  percent,  depending 
upon  his  circumstances)  and  gives  an  obligation  for  the 
remainder  payable  in  equal  instalments  adjusted  to  his  in- 
come. If  the  transaction  is  in  accordance  with  sound  credit 
merchandising  policy,  and  the  resultant  obligation  is  suit- 
able, GMAC  purchases  the  time  sales  contract  from  the 
dealer,  and  carries  it  to  maturity. 

General  Motors  Acceptance  Corporation  has  recourse 
to  the  dealer  on  all  obligations  of  purchasers  which  are 
bought  by  the  Corporation.  The  deferred  payments  are 
made  by  the  purchaser  direct  to  the  Acceptance  Corpora- 
tion, relieving  the  dealer  of  routine  collection  details. 

384  The  Turning  Wheel 

Adequate  reserves  are  set  up  to  protect  the  dealer  as  well 
as  GMAC  against  loss. 

The  GMAC  retail  plan  provides  fire  and  theft  insurance 
supplied  by  the  General  Exchange  Insurance  Corporation, 
protecting  the  purchaser  and  dealer  as  their  interests  may 
appear.  A  policy  is  issued  to  each  purchaser  so  that  he  may 
be  properly  informed  of  the  exact  nature  of  his  protection. 
The  purchaser  may  secure,  at  his  option,  collision,  or  all 
property  damage  insurance. 

The  total  retail  GMAC  financing  differential  varies 
according  to  territory  for  the  reason  that  insurance  protec- 
tion is  included  as  part  of  the  differential,  and  insurance 
premiums  vary  according  to  territory  and  type  of  car.  Low 
differentials  are  made  possible  by  large  volume  and  efficient 
and  economical  operation. 

In  contrast  with  other  forms  of  instalment  sales,  the 
amount  of  the  differential  in  the  time  price  paid  by  the  pur- 
chaser depends  upon  the  term  and  amount  of  his  obliga- 
tion. He  pays  only  in  proportion  to  the  accommodation  he 
receives.  The  larger  the  down-payment,  and  the  fewer  the 
number  of  monthly  payments,  the  less  the  differential  be- 
tween the  cash  and  time  prices. 

GMAC  recognizes  no  fixed  terms — GMAC  believes  that 
the  sale  of  cars  on  deferred  payments  as  well  as  for  cash 
should  be  based  primarily  upon  the  quality  of  the  car  at 
the  price,  and  not  on  the  lure  of  so-called  "easy  terms, " 
terms  being  regulated  to  the  income  and  circumstances  of 
the  purchaser,  and  its  financing  operations  are  carried  on  in 
accordance  with  this  principle. 

In  The  Economics  of  Instalment  Selling?  Professor 
E.  R.  A.  Seligman  describes  the  recourse,  the  non-recourse 
and  the  repurchase  system  of  adjusting  the  difficulties 
arising  from  delinquencies: 

The  recourse  system  is  so  called  because  the  customer's  notes,  which 
are  handed  over  to  the  finance  company  by  the  dealer,  are  endorsed 
by  the  dealer  so  that  the  finance  company,  in  case  of  the  purchaser's 
failure  to  pay,  will  have  recourse  against  the  dealer.  The  dealer, 

Carper  &  Brothers,  New  York  City,  1927. 

Financing  and  Insuring  the  Buyer     385 

therefore,  in  order  to  discharge  his  liability  to  the  finance  com- 
pany, is  compelled  to  take  steps  looking  to  the  repossession  of  the 
car  (unless,  indeed,  as  is  sometimes  done,  the  finance  company  re- 
lieves him  of  this  responsibility  and  repossesses  the  car  for  him) 
which  he  may  then  sell  as  a  used  car  to  meet  his  liability  to  the 
finance  company.  The  dealer  thus  assumes  the  responsibility  in- 
volved. If  he  sells  the  used  car  for  more  than  the  balance  of  un- 
paid instalments,  he  makes  a  profit;  if  he  sells  it  for  less  than  this 
balance,  he  undergoes  a  loss.  The  important  factor,  therefore,  is 
the  difference  between  the  actual  value  and  the  amount  of  unpaid 

Opposed  to  the  recourse  system  is  the  non-recourse  system,  or 
in  other  words,  the  system  whereby  the  finance  company  has  no 
recourse  against  the  dealer.  The  finance  company  here  assumes  all 
of  the  responsibility.  It  not  only  makes  the  original  advance  to  the 
dealer  and  receives  the  instalments  as  they  become  due  but,  in 
case  of  default,  institutes  its  own  methods  for  securing  repossession 
of  the  car;  and  subsequently,  after  salvaging  and  reconditioning 
the  car,  the  finance  company  itself  disposes  of  the  used  car  in  the 
market.  Under  this  system  the  dealer  becomes  to  all  intents  and 
purposes  the  agent  of  the  finance  company  for  selling  a  new  car. 
The  decision,  and  frequently  the  investigation,  as  to  whether  the 
individual  purchaser  is  a  good  risk  is  relegated  to  the  finance  com- 
pany; and  virtually  all  that  remains  for  the  dealer  to  do  is  to  dis- 
play the  car,  and  to  arrange  with  the  purchaser  as  to  terms,  which 
in  most  cases  are  the  standard  terms  fixed  by  the  finance  company. 

The  third  or  intermediate  plan  is  the  repurchase  method.  Under 
this  plan  the  finance  company  has  no  recourse  as  such  against  the 
dealer,  but  enters  into  a  contract  with  him  whereby  he  agrees,  in 
the  case  of  repossession  by  the  finance  company,  to  repurchase  the 
car.  In  this  way  the  finance  company  is  saved  the  necessity  of  at- 
tempting to  dispose  of  the  used  car,  and  limits  itself,  in  a  large 
measure  at  least,  to  its  purely  financial  function. 

In  principle,  GMAC  has  held  firmly  to  the  recourse 
system,  continuing  the  dealer's  responsibility  in  the  trans- 
action until  it  is  finally  closed.  This  is  considered  highly  im- 
portant, since  it  means  that  control  of  credit  sales  is  thus 
primarily  in  the  hands  of  the  dealer,  his  judgment  being 
supplemented  by  the  broad  experience  of  a  highly  trained 
credit  organization.  It  follows  that  losses  therefore  will  be 
kept  to  a  minimum,  because  the  dealer  will  exercise  care  in 

386  The  Turning  Wheel 

selecting  his  instalment  customers.  This  fundamental  differ- 
ence between  recourse  and  non-recourse  companies  accounts 
for  the  higher  differentials  generally  charged  by  the  latter, 
since  they  are  not  in  a  position,  as  the  recourse  companies 
are,  to  reduce  risk  by  keeping  the  dealer  back  of  the  paper 
originated  by  his  sale. 

Under  a  strict  recourse  plan,  no  losses  could  theoretically 
be  sustained  by  the  finance  company  except  through  dealer 
insolvency.  From  inception  until  August  i,  1925,  under  the 
GMAC  plan  the  dealer  had  to  meet  all  losses  up  to  the  limit 
of  his  ability  on  certain  risks  against  which  he  could  not 
well  protect  himself  cheaply  and  efficiently.  These  risks  of 
conversion,  confiscation,  and  collision  being  insurable,  GMAC 
covered  the  risks  by  insurance  and  relieved  the  dealer. 

From  1919  to  1932  inclusive,  GMAC  purchased  in  the 
United  States  and  Canada  instalment  contracts  on  3*775,- 
777  new  General  Motors  cars,  or  32.6  percent  of  all  Gen- 
eral Motors  dealers'  sales  to  users,  and  3,564,468  used 
cars.  Under  the  wholesale  plan  it  "floor  planned"  for 
dealers  3,777,703  new  cars  or  32.7  percent  of  General 
Motors  sales  to  dealers. 

The  record  reveals  a  sudden  rise  in  GMAC  contract  pur- 
chases from  1925  to  1926.  Before  1925,  approximately  20 
percent  of  new  General  Motors  cars  were  sold  in  the  United 
States  and  Canada  on  the  retail  GMAC  plan.  Since  1925  the 
average  has  been  about  40  percent.  General  Motors  pro- 
duction turned  sharply  upward  in  1926.  Furthermore, 
GMAC'S  service  had  been  augmented  in  1925  by  the  crea- 
tion of  an  insurance  company;  and  by  the  inclusion  in  its 
financing  plan  of  protection  for  the  dealer  against  the 
hazards  of  conversion,  confiscation,  and  collision.  As  time 
sales  became  more  popular  the  percentage  of  a  dealer's 
business  represented  by  instalment  sales  increased  and,  like- 
wise, the  repossession  risks  in  relation  to  his  resources. 
Therefore  GMAC  instituted  a  reserve  for  the  dealer  to 
protect  him  against  the  costs  and  losses  involved  in  han- 
dling repossessions;  this  dealer-reserve  probably  was  a  big 
factor  in  the  increase  in  GMAC'S  volume  after  1925. 

Since,  in  addition  to  the  moral  factor  involved,  the 
security  and  liquidity  of  any  instalment  contract  is  definitely 

Financing  and  Insuring  the  Buyer      387 

influenced  by  the  size  of  the  down  payment  and  the  schedule 
of  instalments,  the  effort  has  been  to  avoid  long  commit- 
ments and  small  down  payments.  The  most  inclusive  cate- 
gory is  that  which  has  one  third  to  one  half  of  cash  value 
paid  down  with  the  balance  spread  over  twelve  months. 

It  must  not  be  inferred  that  the  comparatively  small 
losses  result  altogether  from  the  relatively  safe  character 
of  the  business;  on  the  contrary,  they  are  kept  in  control 
by  good  management  exercised  at  many  points  in  the 
transaction.  By  no  means  is  every  car  paid  for  on  schedule, 
and  when  payments  fall  behind  it  is  a  nice  problem  whether 
to  extend  or  renew  the  paper  or  to  repossess  the  product.  In 
all  such  cases  the  GMAC  policy  is  to  permit  the  product  to 
remain  with  the  purchaser  whenever  it  is  reasonably  safe  to 
do  so,  and  whenever  it  appears  that  with  considerate  and 
helpful  service  the  purchaser  can  and  will  pay.  The  result  is 
that  retail  renewals,  in  consideration  of  unusual  circum- 
stances, became  necessary  at  times.  The  Corporation's 
policy  in  this  regard  is  regulated  by  conditions,  with  due 
thought  given  to  both  the  interests  of  the  dealer  and  the 

To  finance  the  growing  volume  of  business,  GMAC  sold 
$50,000,000  of  5  percent  serial  gold  notes,  dated  March  i, 
1926,  and  maturing  at  the  rate  of  $5,000,000  annually, 
through  a  banking  syndicate  composed  of  J.  P.  Morgan 
&  Company,  the  First  National  Bank,  the  Bankers  Trust 
Company,  and  The  National  City  Company,  all  of  New 
York.  Before  this  sale  GMAC  had  been  depositing  its 
domestic  receivables  under  a  trust  deed,  against  which 
security  collateral  gold  notes  were  issued.  From  1919  to 
August,  1925,  the  trustee  holding  the  documents  as  security 
for  GMAC  collateral  gold  notes  was  the  Irving  Bank- 
Columbia  Trust  Company.  A  personal  trusteeship  was 
arranged  in  1925  as  a  matter  of  economy.  The  $50,000,000 
long-term  loan  of  March,  1926,  was  not  secured  by  col- 
lateral in  trust,  but  an  indenture  in  behalf  of  the  holders  of 
the  notes  was  executed  to  the  Bankers  Trust  Company. 
Since  April  i,  1926,  GMAC  has  not  pledged  its  domestic 
and  Canadian  collateral. 

388  The  Turning  Wheel 

The  previous  trustee  then  became  comptroller;  receiv- 
ables were  segregated  under  his  control.  The  comptroller 
certifies  to  the  possession  of  live  receivables  and/or  cash 
equal  to  GMAC'S  obligations. 

Short-term  borrowings  were  further  funded  on  February 
I,  1927  when  through  the  same  banking  syndicate  $50,- 
000,000  of  ten-year  sinking  fund  6  percent  gold  debentures 
were  sold  to  the  public. 

The  Financial  Sales  Department,  handling  domestic  bor- 
rowing operations,  has  established  a  national  market  for 
its  short-term  paper  through  banking  institutions  in  every 
state  in  the  Union.  More  than  10,000  banks  have  purchased 
these  notes,  this  clientele  standing  at  7,200  on  December 
31,  1932.  Other  customers  are  insurance  companies,  cor- 
porations, and  individual  investors.  Notes  are  offered  in 
denominations  of  $500  to  $1,000,000  at  prevailing  discount 
rates  for  commercial  paper  and  are  payable  in  many  of  the 
principal  cities  of  the  country. 

Canadian  business  is  financed,  primarily,  by  bank  credit 
obtained  in  Canada.  Financing  of  overseas  branches  is 
handled  through  the  Overseas  Bank  Relations  Department, 
the  funds  coming  from  both  domestic  and  overseas  banking 

In  addition  to  automobile  paper,  which  forms  the  bulk  of 
its  business,  GMAC  has  retail  sales  plans  for  the  purchase 
of  paper  arising  out  of  sales  of  other  General  Motors 
products,  including : 

Delco  farm-lighting  and  power  plants,  oil  burners, 
radios,  Delcogas  machines — all  manufactured  by  Delco 
Appliance  Corporation  of  Rochester,  New  York;  Frigi- 
daire  household  electric  refrigerators,  electrical  refrigera- 
tion for  commercial  establishments,  water  coolers,  ice 
cream  cabinets,  bottle  coolers,  and  air  conditioning  equip- 
ment manufactured  by  the  Frigidaire  Corporation,  Day- 
ton, Ohio. 


The  financing  of  motor-car  purchases  has  always  in- 
volved the  question  of  adequate  insurance  protection. 

Financing  and  Insuring  the  Buyer      389 

Serious  damage  to  the  automobile,  from  any  cause  whatso- 
ever, affects  in  many  cases  the  willingness  and  even  the 
ability  of  the  buyer  to  pay  out  what  is  still  due  on  the  con- 
tract. Prior  to  August,  1925,  GMAC  did  not  require  insur- 
ance, but  left  the  matter  of  proper  insurance  entirely  up  to 
the  buyer  and  the  dealer.  General  Motors,  through  General 
Exchange  Corporation,  maintained  a  service  which  assisted 
and  advised  dealers  in  their  insurance  problems,  counseled 
with  the  manufacturing  divisions  on  matters  of  construc- 
tion, and  assisted  buyers  and  dealers  to  secure  adequate 
insurance  protection  through  reliable  sources.  It  reached  a 
volume  of  $1,200,000  in  annual  premiums  in  1924,  writing 
policies  on  250,000  cars.  Its  experience  resulted  in  the 
extension  of  such  coverages  as  confiscation,  conversion,  and 
single-interest  collision,  and  other  forms  of  protection  to 
meet  the  needs  of  the  dealer  in  connection  with  his  time 
sales.  Analysis  of  many  claims  resulted  in  recommending 
changes  in  construction  and  led  to  the  improvement  of  anti- 
theft  locks,  better  wiring,  and  other  improvements  built  into 
each  General  Motors  car. 

Until  succeeded  by  General  Exchange  Insurance  Cor- 
poration, GEC  built  up  a  body  of  experienced  insurance  per- 
sonnel and  statistical  knowledge  which  was  of  great  value 
to  its  successor.  Its  general  manager  was  W.  A.  Edgar 
from  1920  to  1922,  when  he  was  succeeded  by  Livingston  L. 
Short,  who  later  became  president  of  the  General  Exchange 
Insurance  Corporation.  Curtis  C.  Cooper  was  president  of 
GEC  and  chairman  of  GEIC'S  board  during  his  service  as 
president  of  GMAC. 

Accumulating  experience  left  no  doubt  that  insurance 
was  urgently  needed  to  protect  the  various  interests  of  the 
buyer,  the  dealer,  and  the  purchaser  of  the  contract  in  all 
instalment  sales  of  automobiles.  Only  57  percent  of  buyers 
were  voluntarily  insuring  their  cars  for  their  own  protec- 
tion. Thousands  of  instalment  buyers  suffered  heavy  losses 
without  recovery,  and  of  these  many  were  financially  unable 
to  replace  or  repair  their  cars.  As  a  result  General  Motors 
and  its  dealers  lost  many  customers,  and  both  the  dealer 
and  GMAC  were  in  a  position  to  lose  directly,  since  sums 

390  The  Turning  Wheel 

payable  on  seriously  damaged,  stolen,  or  destroyed  cars 
were  frequently  left  unpaid. 

Once  the  situation  had  been  thoroughly  canvassed,  it 
appeared  evident  that  the  buyers  of  General  Motors 
products,  the  dealers  and  General  Motors  itself  had  so 
much  at  stake  in  the  provision  of  adequate  automobile  insur- 
ance that  it  became  necessary  to  go  beyond  the  service 
offered  by  General  Exchange  Corporation.  Accordingly, 
the  formation  of  General  Exchange  Insurance  Corporation 
was  authorized  on  June  n,  1925,  with  a  capital  of 
$500,000,  and  surplus  of  $1,000,000.  GEIC  began  to  func- 
tion in  August,  1925,  being  chartered  under  the  insurance 
laws  of  the  State  of  New  York.  Within  a  few  months  it  was 
admitted  to  do  business  in  all  the  states,  the  territories  of 
Alaska  and  Hawaii  and  the  Dominion  of  Canada,  offering 
insurance  coverage  in  each  policy  protecting  the  interests  of 
the  buyer,  the  dealer,  and  GMAC.  The  success  of  this  enter- 
prise was  immediate.  On  June  30,  1927,  after  little  more 
than  two  years  of  operation,  the  net  worth  of  the  company 
had  grown  to  $2,176,000  from  the  original  investment  of 
$1,500,000.  The  capital  of  GEIC  has  since  been  increased  to 
$1,000,000,  and  the  surplus  to  $1,500,000. 

The  insurance  company  has  gone  on  expanding.  In  prac- 
tically every  year  since  it  began  operations  it  has  written 
more  automobile  insurance  than  any  other  company.  In  1929 
there  were  495  stock  insurance  companies  in  business  writ- 
ing all  lines  of  fire  insurance.  During  1928  the  General 
Exchange  Insurance  Corporation  stood  tenth  as  to  divi- 
dends paid,  twenty-second  as  to  volume  of  premiums  writ- 
ten, thirty-ninth  as  to  assets,  and  forty-ninth  as  to  capital 
funds,  although  many  of  the  other  companies  insure  classes 
of  merchandise  which  are  not  included  in  GEIC  coverages. 
Furthermore,  GEIC  solicits  neither  renewals  on  fully  paid 
for  cars  nor  policies  on  cars  sold  for  cash,  although  a  small 
volume  of  this  class  of  business  is  written  which  comes  to  it 

Field  experience  showed  the  necessity  for  prompt  settle- 
ments. Coverage  had  to  be  dependable  and  loss-settlements 
very  prompt,  in  order  that  the  buyer  of  the  car  could  have 
his  car  repaired  as  soon  as  possible  after  a  loss  occurred. 

Financing  and  Insuring  the  Buyer      391 

Ill-will  quickly  develops  in  the  case  of  delayed  settlements, 
the  owner's  impatience  turning  into  criticism  of  the  car 
itself,  the  dealer,  and  the  Corporation  which  stands  behind 
both.  Slow  settlement  of  claims  is  a  blow  to  the  prestige  of 
an  insurance  company,  for  delay  in  securing  service  or 
needed  parts  keeps  the  buyer  out  of  his  car,  on  which  his 
pleasure,  and  frequently  his  business,  depend.  Obviously, 
these  considerations  require  special  treatment,  and  are 
largely  responsible  for  the  policy  which  GEIC  follows  in 
settling  claims;  namely,  to  give  the  insured  exactly  that  to 
which  he  is  entitled  under  his  insurance  policy,  and  to  make 
it  available  as  quickly  as  possible. 

The  speed  of  settlement  is  quite  remarkable.  More  than 
7,000  claims  are  settled  in  an  average  month  by  GEIC'S 
own  personnel  in  the  field.  Although  settlements  are  made 
in  distant  areas  and  with  motorists  away  from  their  place 
of  residence,  only  15  percent  of  claims  against  GEIC 
(other  than  total  thefts)  remain  unsettled  more  than  thirty 
days  after  date  of  loss.  This  includes  suspicious  and  con- 
troversial claims.  Total  thefts,  however,  are  subject  to 
the  usual  sixty-day  waiting  period,  a  procedure  followed  by 
all  insurance  companies  in  order  to  let  the  police  act  toward 
recovery  of  the  stolen  car.  Unless  the  car  is  recovered  with- 
in sixty  days,  the  claim  is  paid  on  a  total  loss  basis,  the  pur- 
chaser receiving  a  sum  equal  to  the  value  of  his  car  at  the 
time  of  loss.  GEIC  acts  so  promptly  in  these  cases  that 
within  five  days  after  the  waiting  period  95  percent  of  the 
owners  receive  checks  covering  their  losses. 

In  settling  85,000  insurance  claims  a  year  for  a  gross  sum 
of  $5,000,000  GEIC  comes  in  contact  with  many  pur- 
chasers under  conditions  making  directly  for  building  of 
good-will.  The  staff  adjuster,  who  is  a  GEIC  employee, 
visits  the  assured  in  his  home  or  office  promptly,  and 
arranges  a  fair  settlement  without  delay.  Where  repairs  are 
necessary,  the  work  is  done  wherever  possible  by  the  dealer 
who  sold  the  car,  assuring  the  purchaser  in  this  way  the  use 
of  genuine  parts,  and  authorized  General  Motors  service. 
Upon  completion  of  the  work,  payment  for  the  repairs  is 
usually  made  by  GEIC  directly  to  the  dealer.  A  satisfactory 
claim  settlement  and  satisfactory  repairs  assist  the  dealer 

392  The  Turning  Wheel 

in  cementing  his  relationship,  and  that  of  General  Motors, 
to  the  buyer. 

Among  the  coverages  which  were  added  to  the  GEIC'S 
service  in  1930  with  the  approval  of  both  dealers  and  buyers 
is  the  Accidental  Physical  Damage  (A.P.D.)  policy  covering 
damage  to  automobiles  from  all  the  usual  causes,  and  some 
most  unusual  ones,  including  floods,  tornadoes,  riot,  civil 
disturbances.,  and  airplanes.  In  the  A.P.D.  policy  collision 
insurance  is  included.  The  advantage  to  the  buyer  of 
this  type  of  policy  is  apparent,  since  it  results  in  the  almost 
automatic  recovery  of  his  means  of  transportation  with  the 
least  possible  delay.  The  advantage  to  the  dealer  is  also 
evident,  since  this  insurance  provides  cash  for  the  payment 
of  repairs.  The  Accidental  Physical  Damage  policy  is  regu- 
larly offered  by  GMAC  as  an  integral  part  of  its  plan. 
Buyers  may  waive  the  collision  feature  if  they  so  desire,  but 
more  and  more  are  availing  themselves  of  it. 

When  General  Motors  entered  the  insurance  business, 
the  wisdom  of  the  move  was  questioned  by  many  insurance 
men,  even  though  the  Corporation  made  clear  its  intention 
to  operate  only  in  one  highly  specialized  field.  It  was  said 
that  GEIC'S  business  would  be  at  the  expense  of  other  com- 
panies. This  has  not  been  the  case.  Through  the  united 
efforts  of  GMAC,  GEC,  and  GEIC,  the  education  of  the 
motoring  public  to  the  benefits  of  automobile  insurance  has 
been  pushed  decisively,  with  the  result  that  the  business  of 
other  companies  has  increased  along  with  that  of  GEIC. 
Other  companies  have  benefited  by  writing  policies  on  re- 
newals after  GMAC  has  been  paid  out,  and  on  cars  sold 
for  cash  to  persons  initiated  into  the  merits  of  automobile 
insurance  by  GMAC  requirements  on  a  former  purchase. 

The  growth  of  the  General  Motors  Acceptance  Corpora- 
tion since  1919  follows  the  upward  curve  of  the  industry 
and  the  Corporation's  business  in  an  accelerated  tempo  as 
the  popularity  of  instalment  buying  has  increased.  Due  to 
purchases  of  its  stock  by  the  General  Motors  Corporation 
year  by  year  until  1929,  plus  a  transfer  of  $13,750,000 
from  undivided  profits  to  capital  and  surplus,  GMAC  capital 

Financing  and  Insuring  the  Buyer      393 

and  surplus  rose  from  the  original  figure  of  $2,500,000  in 
1919  to  $70,000,000  in  1929.  In  the  same  period  time  sales 
transactions,  both  wholesale  and  retail,  originating  with 
General  Motors  dealers,  and  financed  by  GMAC,  increased 
from  $20,881,000  in  1919  to  $1,133,117,000  in  1929,  the 
peak  figure  of  GMAC  history. 

Starting  with  six  branch  offices  in  1919,  and  336  em- 
ployees, it  grew  to  107  branch  offices  in  1930,  with  seventy- 
three  in  the  United  States,  nine  in  Canada,  and  twenty-five 
overseas.  The  maximum  number  of  employees  was  reached 
in  1929,  with  5,532.  During  1931  and  1932,  twenty-one 
branches  were  closed,  and  the  personnel  stood  at  3,128  on 
December  31,  1932. 

Under  the  most  adverse  conditions  of  the  depression,  loss 
ratios  on  automobiles  have  been  kept  down  to  a  point  at 
which  the  discounting  of  an  automobile  sale  is  demon- 
strated to  be  one  of  the  safest  forms  of  business  developed. 
The  advantages  to  General  Motors  resulting  from  this 
large  financial  operation,  and  the  insurance  business  of  its 
subsidiary,  are  not  confined  to  its  balance  sheet.  By  offering 
to  dealers  plans  which  provide  reasonable  accommodation 
and  adequate  protection  to  themselves  and  to  the  buying 
public,  GMAC  has  assisted  the  parent  corporation  to  reach 
new  high  levels  of  production,  built  good-will  for  the  Cor- 
poration's products,  and  strengthened  the  morale  of  its 
selling  force  the  world  over. 

General  Motors  Acceptance  Corporation  and  General 
Exchange  Insurance  Corporation  have  both  prospered. 
GMAC'S  rate  of  earnings  depends,  of  course,  upon  the 
general  volume  of  trade  and  the  amount  of  money  it  can 
use.  Since  trade  declined  in  1930,  GMAC  borrowings 
from  banks  have  declined  simply  because  it  could  find  no 
use  for  the  money  freely  offered  to  it  at  low  rates.  The  Cor- 
poration called  for  redemption  on  August  i,  1932,  $5,000,- 
ooo  of  its  6  percent  Debentures,  and  on  February  I,  1933, 
it  redeemed  all  of  the  remaining  $30,000,000  of  its  6  per- 
cent Debentures. 

The  present  chairman  of  the  board  of  General  Motors 
Acceptance  Corporation  is  Mr.  Alfred  H.  Swayne,  elected 

394  The  Turning  Wheel 

in  March,  1921.  The  president  of  GMAC  from  its  incorpora- 
tion in  1919  until  March,  1921,  was  J.  Amory  Haskell, 
C.  C.  Cooper  then  being  general  counsel.  The  latter  suc- 
ceeded Mr.  Haskell  in  the  presidency  and  remained  there 
until  October,  1929,  when  he  was  in  turn  succeeded  by  John 
J.  Schumann,  Jr. 

Chapter   XXVIII 


EHIND  all  cooperative  plans  is  the  desire  to  arouse,  for 
mutual  benefit,  the  individual  interest  of  all  who  share  in 
the  work.  General  Motors  has  fostered  several  plans 
which,  after  close  study,  promised  to  be  beneficial  both  to 
the  Corporation  and  to  its  employees.  The  extra  rewards 
of  General  Motors  have  been  based  on  a  desire  to  meet,  as 
far  as  could  be  foreseen,  and  within  the  frame  of  other 
primary  corporate  interests,  the  needs  of  each  of  several 
well-defined  groups. 


In  1918  the  Bonus  Plan  was  adopted.  This  plan  provided 
for  annual  awards  of  General  Motors  Common  stock, 
or  its  equivalent,  to  employees  who  had  contributed  to  the 
success  and  prosperity  of  the  Corporation  in  some  special 
degree  by  reason  of  their  ability,  industry,  and  loyalty.  Dur- 
ing the  first  four  years  of  this  plan,  awards  were  made  in 
two  divisions  (i)  Senior  Awards  to  employees  earning 
$2,400  and  over,  and  (2)  Junior  Awards  to  all  other  em- 
ployees. The  plan  at  this  time  provided  for  a  bonus  fund 
equal  to  10  percent  of  the  net  profits  of  the  Corporation 
after  deducting  6  percent  on  the  net  capital  employed.  Be- 
ginning in  1922  the  amount  set  aside  was  10  percent  after 
deducting  7  percent  on  the  net  capital  employed,  and  em- 
ployees with  salaries  of  $5,000,  and  over,  were  eligible  for 


396  The  Turning  Wheel 

bonus  awards.  Although  other  features  have  been  changed, 
the  10  percent  deduction  of  net  profits  after  capital  service 
has  been  maintained  for  bonus  purposes.  In  1931,  em- 
ployees earning  $4,200,  and  over,  were  eligible  for  bonus 
awards.  Beginning  in  1923,  at  which  time  the  Managers 
Securities  Company  was  organized,  the  amount  set  aside  for 
the  bonus  plan  was  5  percent  of  net  earnings,  after  7  percent 
on  net  capital  employed,  which  amount  was  distributed  in 
the  form  of  Common  stock  through  the  Bonus  Plan,  the 
other  5  percent  being  paid  under  contract  to  the  Managers 
Securities  Company.  Beginning  in  1930,  the  contract  with 
the  Managers  Securities  Company  having  been  terminated, 
the  full  amount  of  the  Corporation's  bonus  provision  of 
10  percent  of  the  net  profits  of  the  Corporation,  after  the 
deduction  of  7  percent  on  the  net  capital  employed,  was 
paid  to  the  General  Motors  Management  Corporation.  One 
half  of  this  payment  takes  the  form  of  a  subscription  by 
General  Motors  Corporation  for  Class  A  stock  of  the  Gen- 
eral Motors  Management  Corporation.  The  Class  A  stock 
so  acquired  is  distributed  to  employees  in  accordance  with 
the  Bonus  Plan.  Class  A  stock  received  by  employees  is 
equivalent  share  for  share  to  General  Motors  Common 
stock,  and  is  convertible  into  the  Common  stock  of  General 
Motors  Corporation  at  the  option  of  the  recipient.  The 
General  Motors  Common  stock  so  used  for  bonus  purposes 
is  purchased  in  the  open  market. 

Since  the  inauguration  of  the  Bonus  Plan,  it  has  received 
the  commendation  of  economists  and  other  authorities  as 
being  one  of  the  best  plans  as  yet  developed.  Perfection, 
however,  has  not  been  attained;  changes  have  been  made, 
and  more  will  be  made.  It  is  worthy  of  note,  however,  that 
the  bonus  plan  is  entirely  based  on  rewarding  employees 
with  stock,  not  cash,  thereby  setting  the  stage  for  a  continu- 
ing property  interest  in  the  Corporation,  and  also  that  a 
real  effort  is  made  to  discover  meritorious  performance. 

Bonus  stock  is  delivered  to  employees  in  four  lots,  one 
fourth  at  the  time  of  the  award,  and  the  remaining  three 
fourths  is  held  in  trust  to  be  delivered  in  equal  instalments 
at  the  end  of  each  of  the  three  following  years.  As  7  percent 

Cooperative  Plans 


was  not  earned  on  the  capital  employed  in  1932,  there  were 
no  bonus  payments  in  that  year. 
A  record  of  the  awards  follows : 

Number  of 

Shares  of 





Stock  (b) 

























Number  of 

Shares  of 





Stock  (b) 

























(a)  No  bonus  was  available  for  the  years  1921  and  1932. 

(b)  Equivalent  number  of  shares  on  basis  of  $10  par  value  Common 

(c)  In  addition  to  the  Common  stock  awarded  in  1919  and  1920, 
18,934   shares   of    7    percent    Preferred    stock   were   awarded, 
of  which  14,191  shares  applied  to  the  1919  awards,  and  4,743 
shares  to  the  1920  awards. 

(d)  Awards  in  1930  and  1931  in  Class  A  stock  of  General  Motors 
Management  Corporation  equivalent  share  for  share  to  General 
Motors  Common  stock. 


The  Managers  Securities  Company,  as  the  name  implies, 
was  an  effort  to  reward,  consistent  with  their  responsibili- 
ties, those  holding  the  more  important  managerial  positions. 

Decentralized  organization,  the  term  applied  to  General 
Motors  system  of  management,  presents  a  problem  of  effec- 
tive control  as  between  the  several  operating  units  and  the 
Corporation  as  a  whole.  In  the  decentralized  system  the 
manager  of  a  unit  is  the  chief  executive,  the  equivalent  of 
the  president  of  a  separate  corporation.  Conceivably  he 
could  conduct  the  affairs  of  his  unit  with  little  regard  for 
the  other  units  of  the  group,  if  he  thought  that  in  this  way 
his  own  unit  would  most  benefit.  The  Corporation  on  the 

398  The  Turning  Wheel 

other  hand  cannot  well  have  one  unit  reap  advantage  at  the 
expense  of  another;  also  it  is  desirous  that  the  benefits 
obtained  by  one  unit  shall  be  made  available  to  the  others, 
so  that  each  one  may  be  advancing  not  only  its  own  but  the 
common  good  of  all,  which,  of  course,  is  the  Corporation 
itself.  These  benefits  of  counsel,  cooperation,  and  team- 
work are  necessary  for  effective  control,  and  it  was  apparent 
that  they  could  be  secured  best  by  enlisting  individual  self- 

The  tendency  for  management  to  become  divorced  from 
stock  ownership  in  large  enterprises  is  a  commonplace  of 
industrial  evolution.  Both  advantages  and  disadvantages 
of  this  trend  have  been  noted.  Among  the  advantages  fre- 
quently cited  are  these :  creation  of  broader  public  interest 
in  the  Corporation  through  wide  distribution  of  its  stock, 
of  especial  moment  to  a  manufacturer  whose  goods  are  in 
everyday  use  by  millions  of  persons;  the  greater  freedom 
which  management  enjoys,  in  its  dealings  with  the  market 
and  its  employees,  when  personal  participation  in  profit 
by  management  is  relatively  small  compared  to  the  whole 
stockholder  interest.  The  point  has  been  made  that  a  cor- 
porate management  so  circumstanced  can  develop  a  bal- 
anced policy  based  on  long-range  views  toward  the 
well-being  of  each  of  the  three  main  interests  toward  which 
it  is  responsible:  toward  the  market  into  which  it  brings 
goods  and  services  to  the  public;  toward  its  employees  to 
whom  it  supplies  the  means  of  life  and  improving  status; 
toward  the  stockholders  for  whom  it  earns  dividends  pro- 
portionate to  their  investments  in  the  property. 

On  the  other  hand,  it  has  been  noted  that  too  complete 
a  separation  of  ownership  from  management  may  result 
in  loss  of  interest  and  wasteful  administration,  since  one  of 
the  direct  incentives  to  efficiency  is  lacking  when  manage- 
ment's share  in  profits  is  too  small  to  stimulate  to  utmost 
efforts.  This  feature  received  unusual  attention  in  the 
autumn  of  1923.  Mr.  Pierre  S.  du  Pont  had  retired  from 
the  presidency  of  General  Motors  with  E.  I.  du  Pont  de 
Nemours  &  Company  owning  directly,  or  indirectly  through 
its  affiliate — General  Motors  Securities  Company — 7,500,- 
ooo  shares  of  General  Motors  Common  stock,  or  more  than 

Cooperative  Plans  399 

one  third  of  the  total  issue  of  20,646,397  shares  then  out- 
standing. This  represented  a  higher  percentage  of  the 
Common  stock  than  the  members  of  the  great  Delaware 
family  and  their  various  corporations  have  held  since.  The 
block  of  7,500,000  shares  represented  not  only  what  the  du 
Pont  interests  had  bought  as  a  matter  of  settled  policy,  but 
also  their  purchase  in  the  1920  emergency. 

In  1923  the  time  seemed  propitious  to  reduce  this  great 
block  by  permitting  senior  executives  of  General  Motors  to 
secure  holdings,  thereby  insuring  keen  personal  initiative, 
and  continuity  of  management.  Accordingly  General  Motors 
organized  the  Managers  Securities  Company  of  Delaware 
with  an  authorized  capital  stock  of  $33,800,000,  divided 
into  three  classes:  $28,800,000 — 7  percent  cumulative  non- 
voting  convertible  Preferred  stock;  $4,000,000  Class  A 
stock;  and  $1,000,000  Class  B  stock.  The  du  Pont  Com- 
pany agreed  to  sell  through  its  affiliate,  the  General  Motors 
Securities  Company,  which  held  as  its  sole  asset  7,500,000 
shares  of  the  Common  stock  of  General  Motors  Corpora- 
tion, 30  percent  of  its  holdings  to  Managers  Securities  Com- 
pany. Therefore  2,250,000  shares  of  General  Motors  Com- 
mon stock  were  sold  to  the  Managers  Securities  Company, 
on  October  15,  1923.  Payment  for  this  stock  was  made  with 
$28,800,000 — 7  percent  Preferred  stock  of  the  Managers 
Securities  Company,  and  $4,950,000  in  cash,  making  a  total 
of  $33,750,000,  or  $15  per  share. 

General  Motors  subscribed  for  all  the  Class  A  and 
Class  B  stock  of  the  Managers  Securities  Company,  paying 
$5,000,000  in  cash,  and  entered  into  a  contract  with  the 
Managers  Securities  Company,  agreeing  to  pay  to  the  latter 
each  year  from  1923  to  1930,  inclusive,  5  percent  of  its 
earnings  in  excess  of  7  percent  on  the  net  capital  employed. 

Under  the  trust  indenture  the  Managers  Securities  Com- 
pany agreed  to  pay  to  the  trustee  annually  a  minimum 
amount  of  $1,750,000,  and  such  portions  of  the  remaining 
amounts  earned  under  its  contract  as  were  in  excess  of 
normal  income  taxes,  dividends  on  outstanding  7  percent 
Preferred  stock,  and  dividends  on  the  Class  A  and  B  stocks 
limited  to  7  percent  as  long  as  there  were  outstanding  7  per- 
cent bonds  or  Preferred  stock. 

400  The  Turning  Wheel 

General  Motors  Corporation  thereupon  sold  to  certain 
managers  of  the  General  Motors  Corporation,  and  sub- 
sidiaries, such  amounts  of  Class  A  and  Class  B  stock  as 
were  determined  by  a  special  committee  of  the  board  of 
directors  of  General  Motors  Corporation. 

The  plan  was  a  significant  example  of  Corporation 
thought  and  practice.  It  provided  for  all  the  contingencies 
which  could  be  foreseen,  such  as  changes  in  personnel 
through  resignation,  dismissals  and  death,  with  provision 
that  the  determination  of  the  Finance  Committee  should 
prevail  in  all  matters  of  discretion. 

In  all,  eighty  men  were  selected,  to  whom  Class  A  and 
Class  B  stocks  were  sold  in  varying  amounts.  A  unit  of  200 
shares  of  Class  A  stock,  and  200  shares  of  Class  B  stock 
cost  $25,000.  The  number  of  units  allotted  to  an  individual 
depended  upon  his  significance  to  the  Corporation. 

Cash  dividends  approximating  $350,000  were  paid  to 
each  unit  of  Class  A  and  Class  B  stock  during  the  seven 
years  of  the  company's  contractual  life.  At  the  start,  the 
holder  of  one  unit  received  dividends  of  only  $600  a  quar- 
ter, the  balance  of  earnings  going  to  debt  service.  As  the 
debt  was  reduced,  the  quarterly  dividends  paid  to  the  man- 
agers rose.  The  sums  devoted  to  debt  service  reduced  the 
company's  obligation  to  such  a  point  that  in  1926  the  bal- 
ance of  the  purchase  price  was  financed  at  a  lower  interest 
rate.  The  original  indebtedness  of  $28,800,000  was  fully 
paid  by  1927. 

The  rapid  rise  in  earning  power  of  General  Motors 
Corporation  during  these  years  brought  a  phenomenal  in- 
crease in  the  value  of  these  units.  Each  beneficiary  of  the 
plan  receives  eventually,  for  each  original  unit  bought, 
22,545  shares  of  $10  par  value  Common  stock;  and  even  at 
the  low  price  prevailing  in  1933  the  value  of  an  original 
unit  was  more  than  ten  times  its  original  cost. 

It  has  been  said  that  General  Motors  made  many  men 
independently  rich  through  its  Managers  Securities  plan.  Of 
course,  heaping  up  wealth  for  them  so  abundantly  and 
swiftly  was  not  contemplated  when  the  proposal  was  made 
and  the  plan  drawn.  At  that  time  the  prospect  was  that  the 
managers,  with  good  luck  and  the  best  of  team-work,  would 

Cooperative  Plans  401 

reap  perhaps  a  fraction  of  what  they  actually  received.  No 
one  could  anticipate  the  rosy  future  which  was  destined  for 
the  Corporation  and  the  country  at  large  during  the  six 
years  that  followed.  To  what  extent  the  stimulation  of 
managerial  interest  added  to  profits  cannot  be  determined 
accurately,  but  this  was  probably  a  very  considerable  fac- 
tor in  the  strides  which  the  Corporation  took.  To  some  ex- 
tent, the  managers  rewarded  had  created  their  own  for- 

The  Corporation's  contract  with  the  Managers  Securities 
Company  was  to  have  expired  on  December  31,  1930,  but 
was  terminated  by  agreement  on  December  31,  1929,  in 
order  to  organize  the  General  Motors  Management  Cor- 
poration along  somewhat  the  same  lines  as  the  Managers 
Securities  Company. 


With  the  termination  of  the  contractual  relationship  with 
the  Managers  Securities  Company  as  of  December  31,  1929, 
the  advantages  of  the  plan  were  so  manifest  that  the  Gen- 
eral Motors  Management  Corporation,  organized  in 
March,  1930,  consolidated  the  Corporation's  two  previ- 
ously mentioned  profit-sharing  plans. 

The  General  Motors  Management  Corporation  was 
formed  in  Delaware  with  an  authorized  capital  of  $10,500,- 
ooo,  consisting  of  50,000  shares  of  Common  stock,  500,000 
shares  of  Class  A  stock,  500,000  shares  of  Class  B  stock, 
all  of  $10  par  value. 

This  capital  was  authorized  to  cover  the  functions  previ- 
ously carried  on  under  the  Managers  Securities  Company 
and  the  Bonus  Plan,  to  carry  both  profit-sharing  arrange- 
ments forward  for  seven  years,  to  March,  1937. 

General  Motors  Corporation  sold  to  the  Management 
Corporation  1,375,000  shares  of  General  Motors  Common 
stock  at  $40  per  share.  This  stock  had  been  purchased  from 
time  to  time  in  the  open  market  by  General  Motors  Cor- 
poration in  anticipation  of  a  profit-sharing  plan  to  replace 
the  Managers  Securities  Company.  The  Management  Cor- 
poration financed  this  purchase  by  the  sale  of  50,000  shares 

402  The  Turning  Wheel 

of  Common  stock  at  $100  per  share,  and  by  the  issuance  of 
$50,000,000  of  seven-year  6  percent  serial  Debenture 
bonds.  General  Motors  Corporation  subscribed  to  the  50,- 
ooo  shares  of  Common  stock,  and  in  turn  sold  the  bulk  of 
the  shares  to  some  220  of  its  executives  at  $100  a  share. 

General  Motors  entered  into  a  contract  with  the  General 
Motors  Management  Corporation,  agreeing  to  pay  the 
latter  yearly  on  or  before  March  loth  of  the  succeeding 
year  for  a  period  of  seven  years  ending  December  31,  1936, 
a  sum  equal  to  5  percent  of  the  net  earnings  of  General 
Motors  during  the  preceding  calendar  year  after  deducting 
7  percent  on  the  capital  employed.  In  addition,  General 
Motors  agreed  to  subscribe  an  amount  equal  to  an  ad- 
ditional 5  percent  of  its  earnings  to  the  Class  A  stock  of 
the  Management  Corporation,  at  the  book  value  thereof, 
based  upon  the  cost  of  the  General  Motors  Common  stock 
which  the  Management  Corporation  was  to  purchase  from 
time  to  time  in  the  open  market. 

The  payments  on  account  of  earnings,  under  the  contract, 
after  making  provision  for  income  taxes,  accrue  exclusively 
to  the  benefit  of  the  Common  stock.  These  net  earnings  are 
capitalized  and  paid  to  the  Common  stockholders  as  a 
dividend  in  Class  B  stock.  There  is  allocated  to  each  share  of 
Class  B  stock  one  share  of  General  Motors  Common  stock. 


One  of  the  most  significant,  comprehensive,  and  inter- 
esting plans  in  the  history  of  industrial  relations  is  the  Em- 
ployes' Savings  and  Investment  Plan,  established  by  the 
Corporation  in  1919.  As  the  Corporation  grew,  and  the 
number  of  employees  increased,  many  plans  were  considered 
for  providing  for  them  in  their  later  years  when  they  were 
retired  or  to  tide  them  over  times  of  need.  Instead  of  fol- 
lowing a  more  conventional  corporate  plan,  John  J.  Raskob 
conceived  the  idea  of  enlisting  the  interest  of  employees 
throughout  the  organization  (in  1919  numbering  85,000) 
in  a  plan  of  systematic  saving  and  the  building  up  of  in- 
dividual estates  through  these  savings,  aided  by  propor- 
tionate contributions  on  the  part  of  the  Corporation — these 

Cooperative  Plans  403 

contributions  being  made  in  such  a  manner  as  would  give 
employees  an  opportunity  of  sharing  in  the  development  of 
the  business.  It  was  felt  that,  by  helping  those  who  helped 
themselves,  they  could  attain  positions  of  individual  inde- 
pendence that  would  enable  them  to  care  for  themselves 
and  their  families  in  later  years.  Since  the  inauguration  of 
the  plan,  experience  has  brought  out  the  values  of  various 
features  in  it,  additional  to  those  with  which  it  was  origi- 
nally and  chiefly  concerned. 

The  plan  provided  for  the  establishment  of  two  funds, 
a  Savings  Fund  and  an  Investment  Fund,  a  new  class  to  be 
started  at  the  beginning  of  each  year,  and  to  mature  in  five 
years.  As  indicated  previously,  the  plan  originated  with  the 
class  of  1919.  Into  the  Savings  Fund  of  each  class,  as  it  was 
formed,  any  employee  who  had  been  in  the  service  of  the 
Corporation  for  three  months  or  more  was  allowed  to  pay 
10  percent  of  his  earnings,  not  to  exceed  $300  for  the  year. 
The  limit  in  1927  was  increased  to  20  percent  but,  begin- 
ning with  the  current  class  of  1933,  it  has  been  revised  to 
10  percent,  as  it  was  originally.  Payments  into  the  fund  were 
facilitated  by  having  the  employee  designate  the  amounts  he 
wanted  to  save  periodically,  and  then  deducting  such 
amounts  from  his  regular  wage  or  salary.  For  each  dollar 
thus  paid  into  the  Savings  Fund  by  the  employee,  and  re- 
maining to  his  credit  at  the  end  of  the  year,  the  Corporation 
contributed  a  given  amount  to  the  Investment  Fund  for  the 
account  of  such  employee. 

The  Corporation's  contribution,  under  the  plan  operative 
.for  the  classes  of  1919,  1920,  and  1921,  ran  as  high  as 
dollar  for  dollar;  for  the  classes,  1922  to  1932,  inclusive, 
the  contribution  was  fifty  cents  for  each  dollar;  and,  under 
the  new  plan  beginning  with  the  1933  class,  twenty-five  cents 
for  each  dollar  will  be  paid.  The  monies  thus  paid  in  by 
the  Corporation  are  invested  in  Common  stock  of  General 
Motors  Corporation,  as  is  also  the  income  therefrom  dur- 
ing the  life  of  the  class,  and  accrue  to  the  benefit  of  the 
employee.  On  payments  into  the  Savings  Fund,  the  em- 
ployee is  credited  with  interest  at  the  rate  of  6  percent 
per  annum,  compounded  semi-annually,  except  for  the  last 

404  The  Turning  Wheel 

four  classes,  in  which  interest  was  compounded  annually. 
Beginning  with  the  current  class  of  1933,  in  view  of  the 
lower  prevailing  interest  rates,  the  rate  in  Savings  Fund 
payments  has  been  changed  to  5  percent,  compounded 

As  a  new  class  is  started  at  the  beginning  of  each  year, 
it  is  possible  for  each  employee  to  have  at  one  time  10 
percent  of  his  annual  wage,  up  to  $300,  invested  in  each 
of  six  consecutive  savings  classes,  or  a  total  maximum 
investment  of  $1,800.  Means  are  provided  whereby  the 
employee  may  withdraw  his  funds  with  accrued  interest  any 
time  he  wishes.  In  the  event  of  his  leaving  the  Corporation, 
he  must  withdraw  his  funds  except  in  special  discretionary 
cases.  If  he  makes  such  withdrawals,  he  receives  back  not 
only  his  original  savings,  with  accrued  interest,  but  a  certain 
portion  of  the  Investment  Fund  which  has  been  credited  to 
his  account,  in  relation  to  the  length  of  time  his  savings 
payments  remained  in  the  fund.  Under  the  plan  governing 
the  first  three  classes,  1919,  1920,  and  1921,  the  unaccrued 
portion  of  the  Investment  Fund  of  the  withdrawing  em- 
ployee was  distributed  to  the  surviving  participants  at 
maturity,  but  this  tontine  feature  was  eliminated  beginning 
with  the  class  of  1922 — the  forfeited  Investment  Fund  por- 
tion subsequently  reverting  to  the  Corporation. 

Nine  classes  have  matured  since  the  plan  was  inaugu- 
rated, and  receipts  by  employees  in  the  various  maturities 
have  ranged  from  a  return  of  more  than  two-to-one  on  their 
original  investment  to  more  than  nine-to-one,  the  average 
for  the  nine  classes  being  better  than  five-to-one.  An  em- 
ployee who  saved  in  these  nine  classes,  $300  in  each  class, 
$2,700  in  all,  has  received  $4,204.80  in  cash  and  Common 
stock  equivalent  to  367^2  shares  of  the  present  $10  par 
value  stock. 

In  connection  with  the  plan,  the  Corporation  permitted 
an  employee  to  have  his  payments  in  the  Savings  Fund  ap- 
plied on  the  purchase  of  a  home  and,  at  the  same  time, 
receive  the  full  benefits  from  the  investment  fund  at 
maturity.  Over  43,000  employees  have  been  assisted  in  buy- 
ing homes  through  this  arrangement. 

Cooperative  Plans  405 

In  1929  the  participation  in  the  Employes'  Savings  and 
Investment  Plan  reached  the  highest  point,  with  185,000 
employees  participating  in  one  or  more  classes. 

At  the  beginning  of  the  industrial  depression,  the  par- 
ticipating employees  of  the  Corporation  entered  1930  with 
a  reserve  of  approximately  $75,000,000.  In  addition  to  this, 
there  was  an  equity  of  approximately  $15,000,000  which 
had  been  diverted  to  the  purchase  of  homes  or,  in  other 
words,  an  accumulated  fund  of  approximately  $90,000,000 
was  available  as  a  result  of  the  previous  five  years  payments 
and  of  the  contributions  to  the  Employes'  Savings  and  In- 
vestment funds. 

There  were  further  payments  made  into  the  funds  by 
both  the  employees  and  the  Corporation,  from  January  i, 
1930,  to  April  30,  1932,  at  which  time  the  plan  was 
suspended.  During  the  three-year  period,  1930  to  1932,  in- 
clusive, there  was  disbursed  a  total  of  $78,000,000.  At  the 
end  of  1932  there  was  still  available,  in  both  funds,  ap- 
proximately $47,000,000,  to  which  should  be  added  $13,- 
000,000,  remaining  equity  in  the  purchase  of  homes,  or  a 
total  of  $60,000,000. 

The  largest  disbursement  in  any  one  year  took  place  in 
1932  when  approximately  $44,000,000  was  distributed. 
This  total  distribution  represented  the  amount  received  by 
participants  in  the  matured  class  of  1926,  and  the  amount 
withdrawn  from  the  fund  by  employees  whose  services  with 
General  Motors  were  terminated,  or  who  required  money 
to  meet  their  various  needs.  Of  the  total  disbursement, 
$30,719,705  constituted  the  employees'  own  original  sav- 
ings, and  the  balance  of  $13,421,913  interest  and  Invest- 
ment Fund  benefits  (cash  and  securities)  paid  by  the  Cor- 

As  can  be  readily  appreciated,  the  plan  has  proven  of 
incalculable  benefit,  particularly  during  periods  of  stress. 
It  has  given  a  large  measure  of  security  to  employees 
who  were  laid  off  or  put  on  part  time,  as  well  as  to  those 
who,  though  working,  have  had  to  meet  various  emergen- 
cies. It  has  enabled  large  numbers  to  go  back  to  farming; 
has  provided  money  to  many  to  engage  in  small  business 
enterprises  of  their  own;  and  has  assisted  thousands  to  make 

406  The  Turning  Wheel 

adjustments  to  new  conditions.  In  many  communities, 
through  the  distribution  of  these  funds  accumulated  during 
better  times,  it  has  relieved  public  and  private  welfare 
agencies  of  a  tremendous  burden. 

During  the  fourteen  years  the  plan  has  been  in  operation, 
up  to  January  i,  1933,  cash  in  the  sum  of  $105,439,122  was 
paid  in  interim  settlements,  that  is,  settlements  made  prior 
to  maturity.  In  addition,  there  was  paid,  through  the  nine 
matured  classes,  $51,7375237,  representing  $30,406,661  in 
cash  and  1,624,414  shares  of  General  Motors  Common 
stock;  valued  at  the  market  prices  prevailing  at  the  different 
maturity  dates,  this  figure  would  be  $75,912,990.  If  the 
market  value  of  the  securities  at  the  time  they  were  dis- 
tributed is  taken  into  account,  the  total  value  to  employees 
was  $232,455,35 1. 

This  large  figure  indicates  to  some  extent  the  size  and 
scope  of  the  Employes'  Savings  and  Investment  Plan.  Fur- 
ther payments  into  the  fund  were  temporarily  suspended 
after  April  30,  1932,  because  of  the  economic  situation.  On 
August  i,  1933,  in  view  of  improved  conditions,  the  Sav- 
ings and  Investment  Plan  was  resumed  with  certain  modi- 
fications, as  previously  explained,  to  meet  the  new  situation. 


Related  to  the  Employes'  Savings  and  Investment  Plan, 
the  Corporation  had  another  plan,  the  Employes'  Preferred 
Stock  Subscription  Plan,  which  was  in  operation  from  1924 
to  1930,  inclusive. 

Any  employee  who  wished  to  invest  could  buy  propor- 
tionately to  his  salary  7  percent  Preferred  stock  of  General 
Motors  in  amounts  from  one  to  ten  shares,  each  year,  at  a 
price  fixed  annually.  The  cash  proceeds  in  the  Savings  and 
Investment  classes,  as  they  matured,  could  be  applied  to  the 
payment  for  the  stock  or  payment  could  be  made  out  of 
salary  or  wages  over  a  period  of  a  year. 

To  make  the  plan  more  attractive,  there  was  made  each 
year,  for  five  years  (provided  the  employee  remained  with 
the  Corporation)  an  extra  payment  of  $2  a  share,  in  addi- 
tion to  the  regular  $7.00  a  share  dividend. 

Cooperative  Plans  407 

This  plan  was  discontinued  at  the  close  of  1930.  No  fur- 
ther Preferred  stock  offering  has  been  made  to  employees 
since,  but  the  $2  extra  payment  was  continued  during  the 
life  of  present  classes. 


In  order  to  encourage  employees  to  protect  their  de- 
pendents, General  Motors  Corporation  arranged  with  the 
Metropolitan  Life  Insurance  Company  for  the  issuance 
of  an  employees'  cooperative  group  insurance  policy,  effec- 
tive December  i,  1926.  Under  this  plan  all  applying  em- 
ployees of  General  Motors,  its  subsidiaries,  and  affiliates 
may  be  insured  without  medical  examination,  provided  they 
had  been  employed  for  three  months  or  more.  The  cost  is 
shared  by  the  employees  insured  and  the  General  Motors 
Corporation.  In  addition  to  regular  life  insurance,  em- 
ployees who  become  totally  and  permanently  disabled  be- 
fore the  age  of  sixty  receive  the  face  value  of  their  policy 
in  twenty  equal  instalments,  the  first  monthly  payment  being 
made  three  months  after  proof  of  the  disability.  If  death 
occurs  during  such  disability,  the  remaining  value  of  any 
instalments  unpaid  will  be  paid  in  full  to  the  beneficiary. 
Any  insured  employee  leaving  General  Motors  may  obtain 
from  the  insurance  company  within  thirty  days,  without 
medical  examination,  an  equivalent  amount  of  life  insurance 
at  rates  applicable  to  his  age  and  class  of  risk. 

In  1928  the  insurance  plan  was  enlarged  to  include  in- 
creased death  and  total  disability  benefits,  and  in  addition, 
health  and  non-occupational  benefits  were  added  at  a  small 
increase  in  the  cost.  Under  the  new  plan  an  employee  could 
receive  sick  benefits  for  several  different  disabilities  during 
the  same  year,  each  benefit  covering  a  period  of  not  more 
than  thirteen  weeks.  Furthermore,  in  the  case  of  permanent 
and  total  disability  an  employee  could  receive  temporary 
sick  benefits  for  thirteen  weeks,  and  then  be  eligible  for 
total  and  permanent  disability  benefits  for  a  period  of  forty 
months.  Thus  the  combined  benefits  for  a  totally  and  per- 
manently disabled  employee  might  cover  a  period  of  three 
years  and  seven  months. 

408  The  Turning  Wheel 

In  1931  the  total  and  permanent  disability  benefits  were 
restricted  to  those  individuals  who  had  been  continuously 
employed  by  the  Corporation  for  two  full  years.  At  the 
beginning  of  1933,  it  was  deemed  advisable  to  eliminate 
the  total  and  permanent  disability  benefit  because  the  ex- 
perience of  the  insurance  company,  along  with  that  of  all 
other  companies,  had  been  such  that  this  benefit  could  not 
be  continued  without  an  appreciable  increase  in  contribu- 
tions by  the  employees.  Under  the  new  arrangement  a  group 
policy  provides  that  if  an  employee  becomes  permanently 
disabled  after  he  leaves  employment,  and  dies  prior  to  his 
sixty-fifth  birthday,  and  within  twelve  months  after  leav- 
ing, the  amount  for  which  he  is  insured  will  be  paid  in  full 
to  his  beneficiary.  Under  the  old  plan  an  employee  must 
have  been  insured  for  two  years  before  becoming  eligible 
for  the  benefit  under  the  total  and  permanent  disability 
clause.  The  provisions  in  regard  to  regular  death  benefits 
remain  the  same,  while  temporary  disability  benefits  have 
been  reduced  slightly. 

During  1932  the  Corporation  lost  1,048  of  its  employees 
through  death  or  permanent  disability,  on  account  of 
which,  payments  totaling  $2,273,306  were  approved  for  the 
benefit  of  such  employees  or  their  dependents,  and,  in  addi- 
tion, there  were  9,834  employees  who  received  benefits 
amounting  to  $827,739  on  account  of  temporary  disability 
resulting  from  sickness  or  non-industrial  accidents.  Under 
the  group  insurance  plan  approved  claims  for  the  benefit 
of  the  Corporation's  employees  and  their  families  have 
totaled  $16,491,080  from  the  inception  of  the  plan  on 
December  i,  1926,  up  to  and  including  December  31,  1932. 

At  the  end  of  1932  over  99  percent  of  eligible  employees 
were  participating  in  this  plan. 


Any  list  of  activities  of  mutual  benefit  to  employees  and 
the  Corporation  should  include  the  pioneer  work  that  has 
been  done  by  the  Corporation  in  the  field  of  employee  edu- 
cation and  training,  which  is  now  largely  centralized 
through  the  General  Motors  Institute  at  Flint. 

Cooperative  Plans  409 

The  General  Motors  Institute  itself  developed  out  of  a 
plan  suggested  by  Mr.  J.  Dallas  Dort  of  the  Durant-Dort 
Carriage  Company  about  twenty-five  years  ago,  to  secure 
cooperation  between  management  and  wage  earner.  Flint's 
first  effort  in  this  direction  was  the  Flint  Vehicle  Workers' 
Mutual  Benefit  Association,  which  began  as  a  mutual  insur- 
ance society  and  gradually  developed  social,  athletic,  and 
entertainment  features.  This  grew  into  the  Industrial 
Mutual  Association,  huge  in  membership,  occupying  large 
clubrooms,  and  sponsoring  a  broad  program  of  recreation 
and  education  in  addition  to  maintaining  its  insurance  and 
welfare  features,  managed  by  directors  elected  by  the  mem- 
bers of  the  Association,  most  of  whom  are  General  Motors 
employees.  The  I.M.A.  auditorium  in  Flint  is  the  largest 
assembly  hall  there,  and  the  scene  of  the  city's  popular  con- 
certs, athletic  contests,  and  mass  meetings.  As  an  employee- 
managed  enterprise,  I.M.A.  has  been  remarkable  not  only 
for  its  size  and  success,  but  also  for  its  public  spirit,  humani- 
tarian leanings,  and  educational  enterprise. 

The  educational  program  originated  by  the  association 
was  based  upon  the  principle  that  the  best  way  to  help  an 
individual  is  to  help  him  help  himself.  It  began  as  an  eve- 
ning school,  with  convenient  short-unit  courses  closely  re- 
lated to  the  requirements  of  the  automotive  industry,  and 
of  such  a  nature  that  they  could  be  arranged  in  flexible 
sequences  to  meet  the  needs  of  individual  employees  from 
the  plants  for  further  training. 

As  its  courses  of  instruction  increased  both  in  popularity 
and  number,  particularly  in  technical  lines,  a  closer  union 
with  the  factories  seemed  advisable,  since  students  were 
preparing  themselves  for  increased  usefulness  in  the  auto- 
motive trades.  Thus  the  educational  activities  of  I.M.A. 
came  to  be  organized  into  the  Flint  Institute  of  Technology. 
Mr.  Harry  H.  Bassett,  then  president  of  Buick  and  since 
deceased,  took  an  active  interest  in  the  school,  and  in  1926 
enlisted  the  support  of  General  Motors,  after  which  it  be- 
came General  Motors  Institute  of  Technology.  Suitable 
buildings  and  grounds  were  secured  for  the  school  to  meet 
the  requirements  of  divisions  and  subsidiary  companies  of 
General  Motors.  There  are  facilities  for  2,800  day  and 

410  The  Turning  Wheel 

evening  school  students;  the  faculty  has  numbered  forty- 
two  members  giving  full  time,  besides  sixty  part-time  in- 

To  this  institution  then  fell  the  task  of  providing  a 
means  through  which  the  effort  and  experience  of  the  Cor- 
poration might  be  pooled  in  the  development  of  a  sound 
training  program  for  the  various  divisions  and  their  em- 
ployees. It  also  provided  an  agency  for  types  of  training 
which  could  best  be  conducted  for  the  Corporation  as  a 
whole  through  a  central  program. 

Harry  H.  Bassett   (1875-1926},  President  and  General  Manager, 

Euick,  1919-26 

The  training  program,  as  it  developed,  divided  itself  into 
two  main  branches :  first,  that  designed  to  contribute  to  the 
development  of  employees  of  the  existing  organization  and, 
second,  foundation  or  apprenticeship  training  of  young  men 
for  beginning  connections  with  the  company.  The  first  is 
conducted  through  spare  time  and  extension  courses,  the 
second  through  full-time  and  cooperative  training  courses. 

In  the  extension  program,  a  major  emphasis  has  been 
placed  upon  executive  training  for  foremen  and  prospective 
executives.  Here  the  wide  pioneer  experience  of  the  entire 
Corporation  from  the  very  inception  of  the  movement  was 

Cooperative  Plans  411 

pooled  in  the  development  of  the  executive  training  pro- 
gram. There  was  thus  provided  a  uniform  program  rep- 
resenting the  best  experience  and  executive  policies  of  the 
Corporation  in  form  available  to  all  divisions  in  Canada  and 
overseas,  as  well  as  in  the  United  States.  During  the  years 
of  1928  and  1929,  this  program  reached  as  many  as  5,000 
employees  of  the  Corporation,  representing  practically  all 
of  the  divisions. 

In  the  instruction  of  young  beginning  employees,  the 
major  emphasis  has  been  placed  upon  cooperative  training 
— the  General  Motors  Cooperative  Training  Program  for 
manufacturing  units,  and  a  corresponding  Dealer  Coopera- 
tive Service  Training  Program  for  the  service  field.  These 
programs  combine  with  a  practical  experience  in  the  plant 
or  service  station  an  intensive,  related  program  of  technical 
instruction  given  at  the  Institute  through  the  cooperative 
plan  of  alternate  periods  of  work  and  study.  The  program 
thus  gives  the  young  men  both  the  practical  and  technical 
equipment  needed  to  meet  the  requirements  of  the  field  for 
which  they  are  being  trained. 

The  Institute,  because  of  its  central  position,  thus  be- 
comes practically  a  research  laboratory  in  training.  It  con- 
ducts certain  types  of  training  through  a  central  program 
for  the  entire  Corporation,  and  in  addition,  in  cooperation 
with  the  divisions  of  the  Corporation  promoting  an  interest 
in  personnel  development,  it  develops  methods  and  tech- 
niques, collecting  and  correlating  the  experience  of  the  en- 
tire Corporation,  and  bringing  to  each  division  the  advan- 
tage of  the  knowledge  thus  gathered.  The  single  objective 
is  that  of  developing  more  effective  means  of  personnel 
training  for  the  Corporation. 

During  the  later  stages  of  the  depression,  in  common 
with  most  educational  efforts,  the  work  of  "General  Motors 
Tech"  has  been  somewhat  curtailed,  and  its  program  re- 
vised to  correlate  more  closely  with  the  changing  require- 
ments of  the  industry.  The  Institute,  and  the  program  which 
is  centralized  through  it,  have  been  recognized  by  educators 
and  industrial  executives  as  one  of  the  best  managed  in- 
dustrial educational  training  programs  in  the  country. 


Cooperative  Plans  413 


Reference  has  been  made  to  General  Motors'  extensive 
housebuilding  programs  in  a  number  of  the  cities  where  its 
large  manufacturing  plants  are  located.  Back  of  all  these 
construction  projects  was  a  definite  desire  to  provide  better 
housing  for  employees  in  swiftly  growing  cities  where 
private  building  operations  lagged  behind  the  needs  of  the 
wage-earning  population.  Large  subdivisions  were  plotted, 
streets  opened,  sewer  systems  installed,  and  connections 
made  with  public  utilities.  In  some  cases  community  halls 
were  erected  for  public  and  social  gatherings.  The  projects 
were  carefully  planned  from  the  standpoint  of  attractive 
street  layouts,  open  spaces,  and  landscaping.  The  best  pos- 
sible house  was  built  for  the  money,  with  all  benefits  of 
large-scale  buying  inuring  to  the  purchasing  employee.  Com- 
plete in  all  respects,  the  houses  were  sold  to  employees  on 
reasonable  deferred  payments  which  might  be  deducted 
from  wages.  Through  the  operations  of  the  Savings  and 
Investment  Fund,  from  which  deductions  could  be  made  on 
house-buying  account  without  diminution  of  the  employee- 
interest,  the  Corporation  considerably  eased  the  lot  of 
thrifty  employees  in  their  progress  toward  house  owner- 


In  the  past  few  years  some  of  the  units  of  the  Corpora- 
tion have  fostered  cooperative  gardening  for  the  benefit  of 
employees,  both  those  on  the  pay  roll  and  those  temporarily 
laid  off.  As  a  general  practice,  the  unit  provides  the  land, 
renting  it  if  necessary;  attends  to  the  plowing;  provides  the 
seeds  and  plants,  and  competent  direction.  As  instances 
along  this  line  may  be  cited  the  Harrison  Radiator  Corpora- 
tion, Lockport,  New  York,  and  the  particularly  successful 
experiment  of  the  McKinnon  Industries,  Ltd.,  St.  Cath- 
arines, Ontario. 


Nearly  all  General  Motors  plants  maintain  various 
services  for  their  employees.  These  are  under  the  direction 
of  plant  managers,  and  are  of  so  many  sorts  that  no 

414  The  Turning  Wheel 

adequate  description  can  be  given  of  them  here.  Historically, 
Chevrolet  seems  to  have  been  the  leader  of  General  Motors 
in  developing  work  of  this  nature,  and  many  of  its  pioneer- 
ing welfare  activities  have  been  widely  copied  both  inside 
and  outside  of  the  Corporation. 

In  the  Corporation's  annual  reports  various  of  these 
plans  and  programs  have  been  discussed  in  great  detail,  with 
emphasis  on  the  fact  that  they  have  been  inaugurated  "for 
the  purpose  of  promoting  the  effectiveness  and  well-being 
of  the  Corporation's  operating  personnel."  The  1932  re- 
port says : 

It  has  been  stated  that  the  fundamental  objective  in  all  these  plans 
has  been  to  help  the  individual  to  help  himself ;  to  make  him  a  bet- 
ter citizen;  to  give  him  the  opportunity  to  become  independent. 

In  the  main  this  objective  has  been  gained,  and  in  those 
particulars  where  the  greatest  measure  of  successful  co- 
operation has  been  achieved,  it  is  to  be  expected  that  the 
Corporation  will  go  considerably  farther  in  the  direction 
of  employee-benefits. 

The  oldest  and  most  important  of  General  Motors  co- 
operative plans  have  been  revised  freely  under  the  influence 
of  changing  circumstances. 

Chapter   XXIX 

UBLIC  RELATIONS  arise  out  of  a  corporation's  policies 
in  its  dealings  with  actual  and  potential  customers.  Good 
public  relations  make  for  confidence  in  an  institution.  Yet 
mere  good-will  that  leads  nowhere  is  not  enough.  What  a 
corporation  wants  is  the  expression  of  a  belief  in  its  in- 
tegrity through  the  purchase  of  its  products  or  services; 
and  the  confidence  of  those  whose  capital  it  uses  and  those 
with  whom  it  transacts  business  while  producing  those  goods 
and  services. 

Good  products  and  good  services  are  a  fundamental  ob- 
jective of  good  management.  So  also  are  satisfactory  public 
relations,  which  have  a  direct  bearing  on  earnings  and  em- 
ployee morale.  General  Motors  has  defined  the  scope  of  its 
activities  in  this  field  as  follows:  It  is  the  task  of  Public 
Relations  to  "represent  and  interpret  General  Motors  to 
the  public  in  such  ways  as  will  favorably  dispose  the  public 
toward  the  purchase  of  its  products." 

As  a  corporation  grows  in  size  its  operations  inevitably 
take  on  more  social  significance.  Any  vast  industrial  organ- 
ization in  which  large  numbers  of  persons  use  the  capital  of 
the  public  in  the  production  of  goods  becomes  a  factor  of 
importance  in  the  life  of  the  nation.  General  Motors  opera- 
tions in  a  vital  way  touch,  directly  or  indirectly,  people  in 
all  parts  of  the  world.  Its  products  bear  intimately  on  the 
daily  lives  of  all  members  of  the  family  in  countless  homes 
and  in  every  walk  of  life. 

416  The  Turning  Wheel 

Historically,  the  automobile  industry  evolved  swiftly 
toward  a  manufacturer-consumer  relationship.  The  nature 
of  the  product — a  machine  whose  effective  operation  de- 
pended upon  skilled  servicing — required  that  the  manu- 
facturer stand  behind  his  wares  beyond  the  general  practice 
of  the  time.  His  goods  were  style  goods,  not  staple  goods; 
as  such  they  had  to  be  advertised  and  sold,  not  merely  as 
automobiles,  but  as  Buicks,  Cadillacs,  Oldsmobiles,  and  the 
like,  since  their  styled  identity  persisted  through  the  life- 
time of  each  car.  This  had  been  true  also  of  the  carriages, 
and  agricultural  implements  that  preceded  the  automobile, 
but  the  automobile  manufacturer  had  to  carry  consumer 
service  to  an  unprecedented  point.  His  products  were  more 
complicated  and  more  mobile.  The  ease  with  which  the 
public  could  secure  repair  parts  and  skilled  service  almost 
from  the  beginning  was  a  vital  element  in  maintaining 
popular  favor,  and  had  definite  good-will  value  for  the 
manufacturer.  No  other  industry  of  equal  magnitude  stands 
in  quite  the  same  position  with  respect  to  the  public. 

Organized  as  a  holding  company,  the  pressure  of  events 
converted  General  Motors  naturally  into  an  operating  com- 
pany. The  identity  of  manufacturing  groups  was  main- 
tained, each  with  its  selling  organizations,  so  that  General 
Motors  products  were,  and  are  still,  sold,  in  the  main,  under 
division  names.  But  since  General  Motors  had  made  itself 
responsible  for  divisional  operations,  the  old  law  of  the 
industry,  early  recognized  and  never  for  long  disregarded, 
that  the  maker  must  stand  behind  his